SPEciAL - ALU-WEB.DE

Aluminium price and market outlook
Long way to new aluminium price records
G. Djukanovic, Podgorica
At the end of October, when this
article was mainly written, the
aluminium price was struggling
to reach USD2,000 per tonne, but
each time the cash price looked
likely to surpass the hurdle, the
US dollar temporarily got stronger,
pushing the cash price down
to around USD1,900 per tonne.
Market participants have been
confused by a mixture of good and
bad news in recent weeks, while
the optimism felt in August about
a quick recovery of the global
economy has faded. Aside from
the falling US dollar, speculative
activity keeps base metals prices
stable, close to the levels reached
in mid-August, with the aluminium
price oscillating between
USD1,800 and USD1,950 per
tonne during most of the period.
The recovery in industrial production
(excluding China) is still modest, and
although demand for commodities has
bottomed out it is far below the levels
seen in 2007. Deutsche Bank Chief
Executive Josef Ackermann recently
said that the global financial market
and real economy remained “fragile”
because of the threat of corporate insolvencies
and rising unemployment.
Most of the year has been characterised
by a gradually rising aluminium
price, from as low as USD1,251
per tonne in February, while in parallel,
aluminium stocks were rising too.
This has occurred in the past only during
short intervals, when speculative
buying would lift prices despite rising
stocks. According to industry sources,
some 70% of total stocks in the LME
warehouses have been tied up in
financing deals, to release cash for
producers. In contrast, most stockholders
in China have not hedged or
locked up this metal through trade
finance, leaving the stocks in China
(estimated at some 2m tonnes) free to
be released at any time. This may result
in a bigger swing factor for prices
than the LME stocks.
ALUMINIUM · 12/2009
Base metals prices, in general, were
traded above the levels this year fundamentally
justified in view of consumption.
Speculative and investment
buying have lifted commodity
prices in anticipation of an economic
recovery. An unprecedented bundle
of government stimulus packages,
which made a major contribution to
manufacturing industries in many
countries, has cushioned the economic
crunch this year. In parallel, interest
rates in world’s leading economies
were slashed.
Some economic data
While the Western world experiences
the worst economic crisis since the
Great Depression, China continues
its strong economic growth. After
6.1% GDP growth in the first quarter
and a plus of 7.9% in the second
quarter, growth reached 8.9% in the
third quarter year-on-year while the
Western economies were struggling
to emerge from recession. However,
there are also warning voices. Tomo
Kinoshita, an economist at Nomura
Goran Djukanovic
International, said in a report that
China risked creating an asset bubble
similar to Japan’s in the 1980s if
it continued with aggressive lending.
Stephen Roach, Chairman of Morgan
G. Djukanovic
EcONOMicS
Stanley Asia, thinks that China may
face an economic slowdown in the
middle of 2010 because the nation’s
growth model is unsustainable.
Recent report from Eurostat points
out that GDP in the eurozone grew
0.4% in the third quarter compared
with the previous three months. That
was the first positive growth reported
since early 2008. The news means the
eurozone exited the recession together
with the US which saw GDP rise
0.9% in Q3.
In other words: the light at the end
of the current economic tunnel might
have been seen, but no-one can guarantee
that there is not a second tunnel
behind the first, or several smaller
ones, before the bumpy economic
road emerges onto a level plain.
Some aluminium
market statistics
Primary aluminium production (excluding
China) fell to 1.90m tonnes
in September, from 1.96m tonnes in
August and 2.11m tonnes in September
2008, the latest report from the
International Aluminium Institute
(IAI) shows. Daily average aluminium
production in China was 40,600
tonnes in September, up from 37,200
tonnes in August. Global daily average
primary aluminium production
(ex China) was 63,200 tonnes in September,
indicating that Chinese production
accounts for almost 40% of
total global production. Global output
of primary aluminium was running at
an annualised rate of 37.9m tonnes in
September, according to figures from
the IAI and the China Nonferrous
Metals Industry Association (CNIA).
This was the highest production rate
since November last year.
Global aluminium consumption is
expected to be down around 7.7% in
2009, while production is seen to be
down 7.3%, according to the latest data
and estimates by the author. Both figures
have been improved by Chinese
data over recent months. China’s ➝
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