Aluminium may advance 8% on Chinese shortfall Macquarie expects shortfall to shrink towards the end of first half

Print this page Posted on : 03-10-2011 by recycleinme.com

Rising trend

Aluminium has risen 5 per cent this year in London trading and closed on March 3 at the highest price since September 2008.

Even a strong ramp up in supply is set to see the Chinese market in deficit through at least March and April.

Bloomberg

Bloomberg

March 9

Aluminium may climb as high as $2,800 a tonnes as a shortfall drains Shanghai Futures Exchange stockpiles, Macquarie Bank Ltd said, implying an 8 per cent gain from the current price.

Aluminium demand in China is set to exceed supply by 700,000 tonnes over 2011's first half, Macquarie analysts including Mr Max Layton in London said in a report dated March 7. That would eat into inventories tracked by the Shanghai exchange, provided the State Reserve Bureau refrained from selling metal into the market, they said.

Lower SHFE stocks would be a strong bullish catalyst and could easily result in prices spiking to at least $2,700 a tonne, the analysts said.

Most of the non-SHFE stock has been drawn down over the past 8-9 months.

Aluminium has risen 5 per cent this year in London trading and closed on March 3 at the highest price since September 2008. Chinese usage probably will run at an annual rate of more than 17 million tonnes in the first half's later months, against an equivalent pace for local production of about 16.5 million tonnes as of 2010's third quarter, Macquarie said.

Even a strong ramp up in supply is set to see the Chinese market in deficit through at least March and April, the analysts said. “We would recommend market participants take advantage of what we expect will be higher aluminium prices in 1H11 relative to 2H11 over the next 2-3 months.”

The shortfall probably will shrink toward the end of the first half, Macquarie said, estimating that additional capacity will raise production to an annual pace of 18-19 million tonnes by June.

Chinese output of aluminium, used in products from beverage cans to aircraft, was 40,800 tonnes a day in January, the International Aluminium Institute said on February 25.

Aluminium for three-month delivery was last down 0.3 per cent at $2,593 a tonne on the London Metal Exchange.

Source : Business Line