Last Updated : 08 October 2012 at 18:45 IST
'Excess supply holding back Aluminum prices'
Source :Commodity Online
The aluminum market boasts one of the higher demand growth rates amongst the major commodities but the capacity and supply curve somehow manages to remain one step ahead of demand, driving a growing surplus.
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LONDON (Commodity Online): The global aluminum market remains oversupplied, creating pressure for prices, said Citi Research in a commodity research note. The firm is forecasting a price of 93 cents a pound for the fourth quarter of this year.
“The aluminum market boasts one of the higher demand growth rates amongst the major commodities but the capacity and supply curve somehow manages to remain one step ahead of demand, driving a growing surplus,” Citi Research added.
Exchange inventories stand at 5.458 million metric tons, a 5.3% increase from the start of the year.
“According to Wood Mac data, cash costs for approximately 35% of global aluminum smelters are below the current LME spot of $0.94/lb. However, historically elevated merchant premia and government subsidies (China, Brazil and Australia) artificially support the economics of aluminum production,” Citi noted.
The market has lacked a curtailment in production to better match demand and work down inventories, necessary for a “meaningful and sustained” price recovery, Citi concluded.
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