subject: Frbiz.com Reported Despite Stocks Aluminium Prices Climb [print this page] Aluminium prices are rising despite significant overcapacity and surplus production outlook over the next three years, raising a big question mark on the sustainability of the prices at their current levels.
Prices have risen 75% on the London Metal Exchange (LME) from their February 2009 lows of $1,250, reaching $2,200 per tonne on the LME on Tuesday.
However, experts believe that such high price of the commodity is not sustainable, as high inventory on the LME would keep prices under pressure in the near term.
Industry sources say global aluminium production is expected to grow at about 4.5%, which, along with the doubling of inventory at the LME in the last one year to about 4.6 million tonne, should further add on to the surplus.
In a research note, Macquarie Commodity Research forecast aluminium prices to slip to an average of $2,000 per tonne in 2010.
"Together with the fact that the aluminium market is burdened with significant overcapacity and is set to be in small-moderate surplus over the next three years, we do expect the fundamentals to reassert themselves in 2010," the report said.
State-run Nalco last week increased prices of aluminium by Rs 3,500 ($ 74) a tonne, citing improvement in the metals rate at the LME.
In the domestic market, demand for aluminium is expected to grow by about 5-6% led by demand from user industries like automobile, consumer durables, construction, power and packaging industry.
Hindalco in its recent presentation to investors had said that early signs of recovery in aluminium prices were visible, but the large global inventory of 6.5 million tonne is a concern.
The company expects aluminium prices to remain range bound in the short term.
On the demand front, the boom in physical premiums does illustrate that an end to de-stocking is well underway in the main developed countries.
China is witnessing strong aluminium demand from the construction, automotive and infrastructure sectors.
According to a recent report by Enam, aluminium demand in China is expected to grow by 15% in 2010 on the back of revival in construction and auto segments.
However, in the short term, overcapacity, plenty of inventories and reopening of smelters due to return to profitability will cap any upswing in aluminium prices there.
by: Frbiz
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