Sumitomo joins Goldman in expectation of the aluminum market swinging into a deficit

The global aluminum market will swing into a deficit this year for the first time since 2006 as cuts in output deepen and demand from automakers grow, according to trading house Sumitomo Corp.

Global consumption will outpace supply by 61,000 metric tons in 2014, flipping from a surplus of 580,000 tons last year, said Shingi Yamagiwa, Sumitomo’s manager of light metals trading. The deficit will widen to 493,000 tons in 2015, he said.

Sumitomo, which owns stakes in smelters from Malaysia and Australia to Brazil, joins Goldman Sachs Group Inc. in predicting demand will overtake supply this year.

The world will face a 579,000 ton shortfall after seven years of oversupply and low prices resulted in the closing or curtailment of 50 smelters, Goldman Sachs said in a July 23 report.

Citigroup Inc. forecasts surpluses until 2016 while and Morgan Stanley says 2017.

“We’ve brought forward our deficit forecast to this year following more cutbacks amid strong demand, especially from North America,” Yamagiwa said.

Sumitomo reversed its January projection, when it saw a surplus of 312,000 tons this year.

Prices collapsed 36 percent from a peak in 2011 until the end of 2013, forcing producers to shut smelters to trim supplies. That process accelerated in January after Indonesia banned the export of unprocessed ores including bauxite, a raw material used to make aluminum.

The metal entered a bull market last month and prices are up 14 percent this year, the second most among the six main industrial metals traded on the London Metal Exchange.

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