China's aluminium production appears set to grow faster than expected in 2007, with current production rates pointing to output of 12.2 million metric tons, up 32% from 2006, Macquarie Bank said in a report Monday.

That would lead to a potential global surplus of 800,000 tons instead of 330,000 tons, Macquarie said.

The bank's current estimate is for Chinese aluminium output to rise 25% to 11.7 million tons this year, despite government efforts to curb energy-intensive aluminium production.

The stronger-than-expected output growth would leave China with an exportable surplus of 1.5 million tons, though so far, export data haven't shown any signs of a flood of exports, either of primary metal or semi-fabricated products.

"However, it is getting increasingly difficult to see how Chinese end-use demand can keep pace with such a massive boom in production," Macquarie said in a report.

Macquarie estimates China's demand for aluminium to grow 23% this year. It didn't give a figure for the estimated tonnage.

A rise in Chinese exports could weigh down London Metal Exchange prices, currently at $2,831/ton, up $19 on the Friday PM kerb.

On the upside, global aluminium stocks are close to record lows, and could absorb some of the downward pressure on prices arising from a surge in Chinese exports.

Supply disruptions in the alumina market – a key raw material in aluminium production – have reduced a forecast surplus, leaving the aluminium market with a "reasonably positive outlook," Macquarie said.

However, China accounts for both supply growth and the bulk of demand growth, making market outlook analysis difficult.

"Our concern is that while that may be the case for primary aluminium, it is likely that we will see further increases in Chinese exports of aluminium products in the coming months, which will ultimately detract from demand elsewhere," Macquarie said.