Aluminium price under pressure as demand slows
Tuesday, 6 July 2010
Aluminium prices are likely to come under further pressure in Q3 2010, as demand slows during the northern hemisphere summer and supply continues to build. This may slow decline in LME aluminium stocks that has been a feature of the market since February 2010, reports Commodity Online.
Outflows of aluminium from the LME have in any case been very slow, falling just 3 per cent since the start of the year to 4.49 Mt by 15 June. Including aluminium stocks held in Shanghai, above-ground exchange stocks are almost 4.99 Mt (as of 15 June), down only marginally from their record high of almost 5.08 Mt in late May this year.
High aluminium prices have encouraged smelters to restart idled production in spite of the massive surplus of metal. China's aluminium output was almost 1.42 Mt in May, an increase of 42 per cent year-on-year and 26 per cent on the same month in 2008. On an annualised basis this equates to more than 17 Mt. The recovery in consumer demand, however strong, has more or less taken aluminium directly from smelters and some off market stocks, leaving these exchange stocks almost untouched.
Lower aluminium prices in Q3 could force production cuts and restore some sense of balance. Chinese smelters may feel the bite first - with producers above the 7th decile on the cost curve currently under threat - while higher cost smelters in the US and in Europe have been more disciplined and many plants still remain idled from Q4 08/Q1 09.
Outflows of aluminium from the LME have in any case been very slow, falling just 3 per cent since the start of the year to 4.49 Mt by 15 June. Including aluminium stocks held in Shanghai, above-ground exchange stocks are almost 4.99 Mt (as of 15 June), down only marginally from their record high of almost 5.08 Mt in late May this year.
High aluminium prices have encouraged smelters to restart idled production in spite of the massive surplus of metal. China's aluminium output was almost 1.42 Mt in May, an increase of 42 per cent year-on-year and 26 per cent on the same month in 2008. On an annualised basis this equates to more than 17 Mt. The recovery in consumer demand, however strong, has more or less taken aluminium directly from smelters and some off market stocks, leaving these exchange stocks almost untouched.
Lower aluminium prices in Q3 could force production cuts and restore some sense of balance. Chinese smelters may feel the bite first - with producers above the 7th decile on the cost curve currently under threat - while higher cost smelters in the US and in Europe have been more disciplined and many plants still remain idled from Q4 08/Q1 09.