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Aluminium prices to remain under pressure ¨C Report- 2016 China(Guangzhou)Non-Ferrous Metals Exhibition
2/24/2016 non-ferrous metals expo |
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Reuters reported that a massive overhang of aluminium stocks, mostly due to rising Chinese production, is set to cap a tentative price recovery triggered by large output cuts. Benchmark aluminium on the London Metal Exchange hit $1,432.50 a tonne last November, the lowest since May 2009. Prices of the metal used in transport and packaging have since recovered to around $1,500 a tonne, but a stronger rally may only encourage producers to restart idled output capacity.
Large surpluses are due to a ramp-up in China, which accounted for nearly 55 percent of global supplies of around 57 million tonnes last year. Last year plummeting prices and squeezed margins led to production cuts of around 5.5 million tonnes with the bulk, about 4 million tonnes, in China.
CRU''s head of aluminium Marco Georgiou said ¡°We think prices will stay around the $1,400/$1,500 level, that''s low enough to force more supply cuts in China. For a price rally we need to see exports from China falling and for inventories to come down, a process which could take many years.¡±
With total reported and unreported stocks of about 15 million tonnes, chances of a price rally are thin, particularly given higher supplies from China. Part of the reason is investment in low-cost capacity. Analysts in China estimate total costs of new smelters in the remote region of Xinjiang to be below 10,000 yuan, possibly the lowest in China. Chinese producers have also been able to negotiate better deals for power supplies.
The China Nonferrous Metals Industry Association in late 2015 estimated total aluminium production costs in China at an average around 12,000 yuan ($1,841) per tonne. Aluminium on the Shanghai Futures Exchange is around 11,000 yuan.
- 2016 China(Guangzhou)Non-Ferrous Metals Exhibition
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