China¡¯s appetite to keep aluminum prices up

LONDON (Commodity Online): China is all set to drive the aluminium market once again with its imports set to go up around 25 times in the next four years.

According to Harbor Intelligence, global leader in aluminium market forecast, said conditions like accelerating demand in China, stronger seasonality, a weakening US dollar, confidence in bullish territory and falling aluminum inventories will ensure a big bull run in aluminium market.

Prices should reach $2,400 per mton (110 cent/lb) before year end, it said. For next year, prices should average $2,527 per mton (115 cent/lb) and increase as high as $2,700 per mton (125 cent/lb) at some point in the first half of the year.

It said aluminum imports by China, the world’s largest producer, may increase more than 25 times by 2015 as surging local demand outpaces growth in output.

Imports of the metal used in autos may total 198,000 tons next year and 5.04 million tons in 2015, the Laredo, Texas-based group said in a report e-mailed today. China’s demand may gain 12.9 percent a year from 2011 to 2015, outpacing annual output growth of 9.8 percent, said the report from Harbor.

Increased purchases by the world’s largest metals user may support an advance in global prices, benefiting companies such as Alcoa Inc., the biggest US producer. China’s aluminum prices may gain more than 10 percent next year as an energy- saving drive forces output cuts.

“China will increasingly import primary aluminum, the report said. “Although there has been talk that the output cuts are being replaced with new, more efficient capacity, our view is that conditions are no longer in place for China’s aluminum output to over-deliver as it did in the past.”

Growing Chinese aluminum demand will help boost global use by 13 percent this year.

Aluminum LME 3M prices closed the session down 0.8% or $21 per mton (1 cent/lb) at $2,400 per mton (108.9 cent/lb). Prices fell along with most of the metal complex mainly on a stronger US dollar vs the Euro and tightening measures in China (reports said that China raised the bank reserve requirement ratio from 17% to 17.5%).

Nevertheless, market fear as measured by the VIX plunged 9% and reached levels considered super bull for metal prices (below 20) for the first time since May ’10. Industry news and data were supportive for prices with reports saying China’s Henan province is planning to idle more aluminum capacity to meet the government’s energy saving goal.

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