Aluminium is keeping its winning momentum with supports provided by the Chinese production cuts by 5-10%. The fact given was that Aluminium was in surplus across the globe and these cuts will ensure the gap to be filled in days to come. Twenty companies of China signed an agreement to cut output by 5 to 10 percent. The global supply surplus was 458000 tons in the first four months of the year, the World Bureau of Metal Statistics said. Analysts expect that this will remove as much as 1.2 million metric tons of Aluminium supplies.
During the week ending 11th July Aluminium prices gained $ 167 to end the week at $ 3322 per tonne. All time high for Aluminium was 3375 per tonne on 11th July 2008. However the inventories levels are in quite comfortable position at 1088675 tonnes up 500 tonnes during the week and contrary views highlight the fact that the constant decline is necessary before Aluminium takes a leap forward. On MCX July expiry Aluminium hit an all time high of 144.20 per kg.
The overall outlook remains strong, the prices of Aluminium on LME can see a upside to 3400-3500 per tonne levels, the same currently hovers at $ 3300 per tonne mark after hitting an all time high of 3370 and if this happens the prices in the domestic futures market of Aluminum can go up to 150 levels.
China was a net importer of primary Aluminium again in May, according to the full metals trade report. Exports were just 4022 tonnes, down by 72% year-on-year, while cumulative exports were 26103 tonnes in the Jan-May 2008 period down by 79.5% from the 88500 tonnes exported in the year-earlier level. Imports, meanwhile, have been running at very steady levels so far this year. At 59299 tonnes over the first five months of 2008 cumulative imports were virtually unchanged year-on-year. The result has been a swing by China from net exporter of primary metal to net importer. Net imports were 6823 tonnes in May, bringing the cumulative total to 33196 tonnes over the Jan-May 2008 period. By contrast, the country was a net exporter of primary metal to the tune of 28848 tonnes in the same five-month period of 2007.
It has become all the more certain that the prices of Aluminium will continue to remain robust in days to come. Continuous decline in Inventories and Power Shortages across the major smelters are also giving confidence to the market participants to join the rally.
Aluminium is a high power consumption sector and more often then not the prices are determined by the amount of power available for the smelters. In the last few years power is becoming scarce on the rising demand from various sectors and the supplies are not been able to handle the pressure. Aluminium majors like South Africa and China have been facing the power shortages and this trend is likely to continue in days to come.
China power costs are double when compared with that in the industry, Inflationary concerns are forcing the Chinese government to remove the tariff discounts given earlier to the Power industry and to raise the tariffs. Smelting capacities are also expected to migrate to Russia, Middle East, Africa, Indonesia, and Iceland in the years to come while India and China will lag behind improving there power generation capacities. This is expected to adversely affect the Aluminium producers.
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