Cheers China! Beer can switch to boost aluminum, Rio Tinto says

[MELBOURNE] A switch by China's packaging firms to favor aluminium cans for beer and soft drinks is among key drivers that'll underpin continued demand growth for the lightweight metal, according to Rio Tinto Group.

The world's second-biggest miner, which generates more than a quarter of its revenue from the metal, also sees demand being boosted by the forecast rise of electric vehicles and the push by manufacturers to produce lighter cars to reduce emissions, Rio's aluminium unit Chief Executive Officer Alf Barrios said Monday in an interview.

"In the packaging sector, especially around soft drinks and beer in China, we're seeing a shift from glass to aluminium," he said.

Chinese beer makers, including Tsingtao Brewery Co., rose on Monday after both UBS Group AG and Goldman Sachs Group Inc. issued reports saying they expected industry-wide price hikes. UBS estimates 28 per cent annual profit growth for the sector from 2018 to 2020 as demand recovers.

London-based Rio forecasts aluminium demand to rise about 4 per cent a year for the next five years, and is yet to factor in the likely additional benefits that'll flow from the adoption of electric vehicles, which typically use more of the metal than conventional vehicles, Barrios said.

Global consumption of refined aluminium is likely to have annual growth of 3 per cent to 4 per cent in 2018 and 2019, while China's curbs to supply will act "as a long-term game changer," spurring price gains to incentivise the addition of new capacity elsewhere, according to Citigroup Inc.

Supply cuts under anti-pollution efforts and industry reform in China means "the rest of the world, where demand is also growing, will have to supply itself with aluminium in future," Barrios said in the interview. "Until now, the thinking was that China would be a net exporter, and all that growth would come from China, that's where the change is, that view is now different."

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