(The opinions expressed here are those of the author, a columnist for Reuters.)
By Andy Home
LONDON, March 24 (Reuters) - China still holds the key to balancing the global primary aluminium market.
Its exports of metal in the form of semi-manufactured products have slowed in the first couple of months of 2016 but at 590,000 tonnes they represent the movement of significant surplus into the rest of the world.
The exact state of Chinese production is uncertain, with February figures from the China Nonferrous Metals Industry Association (CNIA) pending.
Run-rates appeared to drop significantly over December and January but the market has been caught out before by volatility in the data over the end-year period, both calendar and Lunar.
Only with the February figures will we see whether all the talk of curtailing production in return for government assistance in stockpiling metal has translated into a material drop in output.
However, with all eyes on what is happening in China, it's easy to overlook a trend of rising production in the rest of the world.
Without anyone really noticing, run-rates crept up to an annualised 25.51 million tonnes in February, the highest level since December 2011, according to the International Aluminium Institute (IAI).
Output in the first two months of 2016 rose by 3.7 percent, an acceleration from growth of 2.5 percent over the course of 2015.
But while production is declining in the United States and Brazil, new capacity is simultaneously firing up elsewhere.
A NEW DRIVER
The last spurt in aluminium production growth outside China took place in the Gulf region in 2014, resulting from the full ramp-up of the 1.3-million-tonnes per year EMAL smelter in Abu Dhabi.
Production growth in the Gulf braked sharply last year to 2.3 percent from 27.4 percent in 2014 and is running at just 1.5 percent so far this year.
That is probably reflective of "normal" capacity creep at smelters such as Aluminium Bahrain, which lifted output by 30,000 tonnes last year to a record 960,600 tonnes.
As Gulf production growth levels off, a new driver is taking over in the IAI's Asia (non-China) reporting region.
Output here jumped by 23.6 percent last year and growth is still running at a fast 18.3 percent so far this year.
Hindalco, part of the Aditya Birla group, reported primary metal production of 296,000 tonnes in the fourth quarter of 2015, up 35 percent on the year-earlier period.
The 360,000-tonnes per year Mahan smelter in the state of Madhya Pradesh was operating at full capacity by the end of December, while the similar-sized Aditya plant in the state of Orissa is "well on course for full ramp-up", according to Hindalco.
Both have captive coal-based power supply and are fed by the new Uktal alumina refinery, which itself is working towards capacity of 1.5 million tonnes per year.
Vedanta's 1.25-million-tonnes per year Jharsuguda II plant began commissioning at the start of 2015 and is only slowly firing up towards nameplate capacity.
Quite evidently, full ramp-up is going to be a lengthy affair and the smelter will continue adding to India's and the region's aluminium production profile over the coming period.
While new capacity ramps up in India, the impact of the last round of production cuts elsewhere is starting to fade.
Only in the Americas was production still falling in January and February.
In Latin America, Brazil has suffered the most from low prices, with only two of seven smelters still operating.
However, the last closure, that of Alumar, took place almost a year ago and regional output shows signs of stabilising around an annualised 1.3 million tonnes.
That means the only part of the world where aluminium production will continue declining over the coming months is North America, where Alcoa (NYSE: AA - news) is phasing out three plants in the United States.
The Warrick smelter in Indiana is due to close permanently by the end of this month. Wenatchee and Intalco are due to be idled this quarter and next quarter respectively.
The number of active smelters in the country will fall to just five with national output expected to decline to around 720,000 tonnes, the lowest level since at least 1950, according to the U.S (Other OTC: UBGXF - news) . Geological Survey.
It's worth noting, though, that the three Alcoa closures will remove around 730,000 tonnes per year of operating capacity, significantly less than Vedanta is bringing on stream at Jharsuguda II.
CHINA STILL THE WILD CARD
There is a broad consensus that the aluminium market outside of China is pretty much balanced, maybe even in small supply deficit.
However, years of painful cutbacks have yet to regenerate the price of aluminium because China continues to over-produce and export its surplus in the form of products.
Hence all the focus on whether Chinese producers will actually rein in output as they have intimated.
China's national run-rate dropped by an annualised 3.4 million tonnes over December and January, a figure so large that it suggests more problems with the data than with actual production.
But until CNIA releases its February figures, what's actually happening in the wild card of the global aluminium market is unknown and unknowable. (Editing by Dale Hudson)