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Fans of Alcoa Inc.'s $27 billion bid for Canadian rival Alcan Inc. might be overlooking the rising threat of competition from elsewhere, particularly China.

The outlook for aluminum prices isn't nearly as strong as it is for other raw materials in part because producers world-wide are having less trouble developing new supplies. This is especially true in China, where aluminum companies have been adding new smelting capacity at a furious pace.

This means that output from Western companies like Alcoa won't necessarily be needed to feed China's soaring demand. Aluminum demand is growing rapidly and may double by 2020 to 60 million metric tons of production, with much of it driven by consumption in China, according to Alcoa's estimates. Last year, China accounted for 25% of the world's aluminum consumption, compared with 13% six years earlier.

In a worst-case scenario, if China adds capacity faster than expected and global economic growth slows, that could lead to a significant drop in aluminum prices.

"We think China is the main risk factor to the aluminum market over the next year or so," says Michael Lewis, global head of commodities at Deutsche Bank AG in London. He adds that long-term aluminum prices could stay relatively high due to the rising costs of production.

Since supplies of aluminum aren't nearly as tight as they are for other commodities, the outlook for aluminum prices isn't as robust as it is for many other metals. While global nickel prices have shot up roughly fivefold over the past three years, and copper has roughly tripled, aluminum has only climbed about 70%.

None of this means that Alcoa's offer for Alcan, if approved, will go badly. On the contrary, a number of analysts and shareholders applaud the planned acquisition, in part because they believe it will give Alcoa more heft to compete with emerging competitors overseas.

Although Alcoa shares closed yesterday on the New York Stock Exchange at $37.63, down $1.10, they are still trading near 52-week highs after jumping significantly following the Alcan bid announcement.

Also, China might not be able to flood the world with its excess aluminum supply because of production disadvantages. For one thing, China is short of the raw materials needed to make the metal, including bauxite, which it must import. And, the electrical power needed to make aluminum, the second most energy-intensive industry on earth, is high. Officials in Beijing, however, oppose diverting scarce energy resources to make aluminum for export.

But unlike its scramble for other commodities, China has had little problem meeting its own aluminum needs -- and then some. China accounted for about two-thirds of the world's supply growth over the past 10 to 15 years. By 2006, China had the capacity to make almost 12 million metric tons of aluminum, or about 30% of the world's total, according to Alcoa.

Leading the charge is Aluminum Corp. of China Ltd., also known as Chalco. Once an afterthought in the global aluminum business, it is now China's biggest producer of aluminum. And it is second only to Alcoa as a world-wide producer of alumina, which is made by refining bauxite.

Shares of the state-controlled company, with a market value of more than $13 billion, are traded in Hong Kong and Shanghai and as American depositary receipts in New York. Chalco's ADRs ended yesterday's Big Board session at $30.84, down 44 cents.