By Kiran Varma
MUMBAI: Aluminium, one of the most widely used industrial metals in the world, is in a crisis these days. Aluminium inventories are piling up every day that the metal is under tremendous price pressure.

Data from the London Metal Exchange on Monday show that aluminium inventories have risen from 4725 tonnes to 1128100 tonnes in a short span.

LME three month forward contract is at $ 2785 per tonne. Supports for the contract is at 2755 levels. Aluminium prices at MCX in India are near its support levels and further weakness will take prices towards Rs 115 and Rs 112 levels.

Analysts say aluminium prices are expected to come down from the current levels in days to come. Aluminium is a very volatile commodity and also news driven, the expectations for coming days are bearish.

Demand from China especially in the wake of the ongoing Beijing Olympics was the main trigger for the rise in price of aluminium earlier. In the first eight months of 2006, global prices of Aluminium rose by 35 percent to an average of US $2,520 per 1 ton compared with the previous year. Now, that Olympics will be over soon, and anticipation of a slowdown in global economy, especially fall in the US consumption is keeping aluminium weak these days.

One of the main reasons for the dipping fortunes of aluminium is that Japan and US, the industry major countries, are facing declining auto sales. Automobile sales in Japan fell last year to a 35-year low as a shrinking population and limited wage growth hurt demand. Japan Automobile Dealers Association showed sales of cars, trucks and buses down 7.6% from the previous year at 3.4 million.

European Automobile Manufacturers' Association (ACEA) said automobile sales resulted in a 0.2 per cent fall during the first three months of the year. The big drop in Germany, which is Europe's largest car market, followed the January hike in the country's value-added tax, led to a slump in sales for the nation's key auto makers - including BMW AG, DaimlerChrysler AG and the Volkswagen brand.

The situation for aluminium in India is not better. Rising borrowing costs is affecting the auto industry. Dollar is trading at six months high against the Euro which reduces the appeal for metals like copper and aluminium.

Global production of Aluminium is estimated to be 33 million ton in 2006. China, Russia, India, US, Australia, New Zealand, Brazil and Venezuela are the leading producers of Aluminium. Global consumption of Aluminium is estimated to register a growth 4 percent to 35 million tons in 2007. China is a leading consumer with 8.2 million tons in 2006 accounting for nearly a quarter of global consumption. Chinese consumption is projected to rise to 9.1 million tons in 2007.

India is rated as the fifth largest producer of aluminium in the world. Production capacity is expected to increase with the completion of 35,000 ton per year smelting capacity at Hindalco and 245,000 ton expansion by Balco by the end of 2006. Annual consumption of India is projected to reach 780,000 tons in 2007 compared with 618,000 ton. India also exports around 82,000 ton of Aluminium per year.

LME, NYMEX, TOCOM, SHFE are the leading centres of global aluminium trade.