Reuters cited Mr Jacynthe Cote CEO of Rio Tinto Alcan as saying that the global aluminum market will be more balanced this year and could shift into a supply deficit by 2013 as new projects fail to keep the pace with high cost capacity cuts this year.

Jacynthe Cote said that "Supply will become more challenging the market will be near a balance this year. If you look at the supply side YoY there's been virtually zero growth given what has been added versus what has been taken out."

Many higher cost smelters in the 40 million tonne per year market have struggled to remain profitable after prices plunged almost a third in the past 12 months to below USD 2,000 per tonne.

On Tuesday, aluminum hit December lows roiled by concerns over sluggish demand and high inventories. Three month prices on the London Metal Exchange were at USD 1,960 per tonne on Tuesday close to or below many plants breakeven level.

With power accounting for a third of production costs, smelters with long term steady energy contracts or cheap hydroelectric power can survive the current turmoil. But many have divested or shut expensive production.

Rio Tinto Plc plans to sell 13 assets across six countries including smelters and alumina refineries worth an estimated USD 8 billion. US producer Alcoa Inc has said that it is taking a hard look at the cost profile of its Point Henry smelter, having already announced the shutdown of about 500,000 tonnes of annual capacity at the start of the year. Norsk Hydro shut its 180,000 tonne per year Kurri Kurri smelter both in Australia.

Mr Cote said that "So we are getting closer to a near balanced market. If that trend continues we could be in a slight deficit next year and the following year because all of the projects are being delayed now. Even so, while producers make cut backs, many are replacing it with capacity in low-cost regions such as the Middle East.

Alcoa is building its Maaden smelter in Saudi Arabia which will open next year and produce 740,000 tonnes per year of aluminum. Many traders say they are also concerned that Chinese output remains high even with the falling prices.

Mr Cote said that China's move last week to cut interest rates for the first time since the depths of the global financial crisis was another sign that the world's leading metals consumer "will continue to track their growth in a very responsible way.

He said that China is still going to grow at near 8 percent this year. The aluminum demand will probably be near 9% this year it's growing in the single digits but it's growing from a much larger base than 10 years ago.