BEIJING (Commodity Online): Aluminium demand in China is expected to grow by 15% in 2010 on the back of revival in construction and auto segments.

According to reports, long term prospect of aluminium is bright as China is still in the middle of completing urbanization and its metal intensive growth is likely to continue for many years to come. It added that about 65% of aluminium consumption is in the east and middle south China. The urbanization of North West and south west has great potential for aluminium demand.

In the short term, overcapacity, plenty of inventories and reopening of smelters due to return to profitability will cap any upswing in aluminium prices.

However, the current average cost of the Chinese smelters is $2,000 and is rising further due to increase in bauxite and alumina and coal and power prices. These cost push factors provide a strong floor for aluminium prices.

LME aluminium is expected to trade between $2,000 to $2,400 in FY11 and analysts feel that FY11 estimate will be $2,200.

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