Aluminum demand in China is expected to grow by 15% in 2010 on the back of revivals in the construction and automobile sectors, www.chinamining.org reports. According to reports, aluminium’s long-term prospects are good as China is still heavily into urbanisation and its metal intensive growth is likely to continue for many years to come. About 65% of aluminum consumption is in the east and mid south of China. The urbanisation of the northwest and the southwest has great potential for aluminum demand.

In the short-term, overcapacity, plenty of inventories and re-opening of smelters due to facilities returning to profitability will cap any upswing in aluminum prices, www.chinamining.org says. However, the current average cost of the Chinese smelters is $2,000/t and is rising further due to increases in bauxite, alumina, coal and power prices. These cost push factors provide a strong floor for aluminum prices.

LME aluminum is expected to trade at between $2,000/t and $2,400/t in FY11 and analysts feel that the FY11 average will be $2,200.

Indian aluminum producers are best placed with captive bauxite, alumina and power and are insulated from across the board cost increases to a large extent. In the pure aluminum space, Nalco is set to benefit. It is one of the cheapest aluminum producers and has volume upside of 30% in both aluminum and alumina due to brownfield expansion.