LME (London Metal Exchange) aluminum inventories fell below 1Mt for the first time since 2008; CRU forecasts a 1.7 Mt world deficit in 2018 and notes that the market will soon need additional supply.

Few new smelters are being built outside China, and supply-side reforms are capping Chinese expansions. Capital for new investments is limited, CRU notes, as 40% of smelters are losing money due to high operating costs. Currently, high-cost smelters are under threat of closure due to escalating raw material costs, and remaining idled capacity is mostly likely to remain closed.

Alcoa reported in its 2018 3Q results a change of -6.3% of margin for the aluminum business unit, and the lowest quarterly adjusted EBITDA for the smelting unit in the last two years. The company announced that it is beginning a consultation process in Spain aiming to close its two smelters La Coruna and Aviles, which have together 180,000 t yearly capacity.

In China, five smelters have recently announced cost-related closure: combined these plants in Gansu and Shanxi will close more than 500,000tpy—confirming that a sizeable share of smelters are losing money today.