Global aluminum market in strongest shape since 2008-09 crisis

Arab News reported that the global aluminum market is in its strongest shape since the financial crisis of 2008 to 2009 and the price of the lightweight metal could move higher this quarter.

Norsk Hydro, a top global producer said that the company, one of Norway’s biggest industrial companies and also a big producer of hydro electric power, has ridden a deep downturn in the global aluminum sector, but its shares have surged this year on the back of rising prices for the metal.

Posting Q2 results that fell short of expectations after all units except for primary aluminum, its biggest division involved in smelting, performed weaker than expected.

Mr Svein Richard Brandtzaeg CEO of Hydro said that he expected global demand for aluminum to exceed production in 2014 after six years of oversupply. The market was being supported by moves by some key industries such as car manufacturing to use more aluminum instead of steel and copper. The market is becoming tighter and there is a deficit of aluminum in the market outside China. We see the metal prices moving (higher), we have record high standard ingot premiums and also record-high metal products premium.”

Global inventory levels fell around 5% during the quarter, the cash aluminum price is up 14% since the start of the year and producers remain disciplined in keeping down production after shutting some plants and curtailing production from others during the worst of the sector’s crisis.

Higher Prices;
The price premium for buying the physical commodity should continue to rise in the Q3 after USD 55 per tonne increase for European aluminum in the Q2 forecasting a similar increase in the current three month period.

Mr Brandtzaeg said that buyers of the commodity usually have to pay a premium to get the actual commodity and the extra cost will depend on their physical location. Premium levels hit record highs in the Q2. Producers have shut 4 to 5 million tons of annual primary production capacity over the past several years, or about a tenth of the global capacity and only about 1 million tons could be restarted relatively easily. Despite the solid outlook, Hydro’s Q2 figures disappointed the market and its shares fell as much as 3.8% erasing some of its 35% rise since the start of the year.”

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