Aluminium prices in June managed to come out of the jinx of the earlier months. The prices saw a recovery in international markets and this positively impacted the prices in Indian markets as well. LME prices tested a high of $ 1675 per tonne on 26th June 2009. During the month of June the prices gained $ 191 or 13% to $ 1650 per ton on 30th June 2009. In H1 2009 (Jan-June) the Aluminium prices have recovered by $ 115 or 7.5%. The prices in the coming days are however expected to face a halt as the demand prospects are still grim. Chinese buying will be taking a backseat as the demand is not fully meeting the supply and the reserves maintained are already high. Aluminium is expected to maintain sideways momentum with some negative bias.
Global Production Of Primary Aluminium Declines:
International Aluminium Institute’s (IAI) latest data for the period of Jan-May 2009 states that the World primary Aluminium production declined by 7.7% to 9.86 million tons as compared to 10.68 million tons during the corresponding period previous year. Overall, Asia produced 1.79 million tons of primary Aluminium in first five months of 2009 a rise of 12% from Jan-Feb 2008. With the exception of Asia, all other regions posted a decline in the primary Aluminium production. North America registered the worst decline of 16% due to lower demand from Aluminium consuming sectors.
Indian Aluminium production increases in May:
Indian Aluminium production increased in the month of May following the trial run production from Vedanta Aluminium Limited (VAL). Vedanta has commissioned its smelter at Jharsuguda from April, 2008 which is presently under trial production. On a monthly basis, NALCO also registered a rise in Aluminium production in May 2009 by 4.8% to 35971 tonnes as compared to April 2009. Bharat Aluminium Company production for May 2009 was 25387 tonnes as against 25304 tonnes in April 2009. When compared on a Y-o-Y basis, the production of NALCO was up 22% from 29437 tonnes in May 2008. Hindalco registered a rise in the actual production for the period of May 2009 to 45919 tonnes from 42189 tonnes in May 2008. On a yearly basis the production increased by 8.8%. Production for the month of April 2009 was 43988 tonnes.
Alcoa losses intact for the third consecutive quarter:
Alcoa second quarter results showed a net loss of $454 million. The loss from continuing operations showed a increase of $168 million to $ 312 million in the second quarter compared with the first quarter loss from continuing operations of $480 million. The demand and prices of Aluminium continued to be impacted by recession which caused the loss for one of the largest producer of Aluminium. Alcoa plans to expand its operations with commissioning of new refineries. The Alumar refinery has already begun to produce its first alumina and is on target for ramp-up to full production during the second half of the year. The upgrade and expansion project will increase the output of the refinery from approximately 1.5 million mt to a total production capacity of 3.5 million mt per year for the Alumar consortium.
Piled Inventories In LME Will Be Difficult To Set off :
LME inventories maintained sharp upswings in the early part of 2009. The same are still quite high when compared to the demand. Total inventories in LME are 4397100 tonnes on 8th July 2009 as compared to a meager 340550 tonnes at the start of this year. China has shown reluctance in increasing its stockpiles of Aluminium further and this means that the rise in stockpiles will continue. LME Aluminium showed recovery all through June, from supports of demand refurbishment from China and easing Dollar, but this recovery is expected for a short term due to the emphasis by major countries on the value of Dollar. Most of the developed and developing nations have their reserves in Dollar and therefore measures have been taken to tackle the slump in Dollar. Lack of arbitrage opportunities and demand on the other hand is causing China to pull its hands out from creating fresh stocks. This is a reason that in early July we have seen Aluminium prices lacking the momentum. The prices are in a low volatile zone now with negative prospects.
In June the prices of Aluminium increased by almost 13% or $ 191 to $ 1650 per ton. In July a correction of 3.7% is registered in the prices which has taken then towards $ 1591 on 8th July 2009.
Outlook:
Aluminium saw a pleasing run in June 2009, on the back of falling Dollar and rising global economic demand scenario. In the month of July the expectations need to be curbed downwards. The latest report by Australian Bureau of Agricultural and Resource Economics (ABARE) suggests that prices for the coming days will remain dependent on the consumption patterns among major economies. World aluminium consumption is forecast to decline by around 12 per cent in 2009, to 32.5 million tonnes. In the first quarter of 2009, China consumption declined 10%. The reducing consumption patterns in consumption patterns have not affected the demand prospects in Middle East. Low energy costs in the Middle East are helpful for production of Aluminium. Aluminium is a highly energy intensive sector.
In domestic market, India recently put a safeguard duty upto 30% on key aluminium components from China. The measure was taken to provide support to the ailing domestic aluminium sector. India’s top Aluminium maker Hindalco reported an almost 80 percent slump in consolidated profit for the year to March. MCX Aluminium futures were mostly range bound between Rs 75-81 per kg during last month. In the near future prices are expected to break the bottom range and prices can test Rs 70 per kg, the upper cap of Rs 81 per kg seems to be intact for some more time. Overall a correction of 6-8% will bring fresh buying opportunities in prices.
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