The aluminum oversupply will be offset by strong demand growth outlook, lending support to aluminum prices in 2015, says a recent study report by Capital Economics.
The addition of capacities in the Middle East and China has lead to surplus in aluminum market. Aluminum production by China grew 6% in 2013. The production growth is expected to reach 10% in China this year.
According to Capital Economics, the increased supply of aluminum will be offset by the rising aluminum demand from traditional consuming sectors. The recovering automotive and construction sector in the developed world, especially the US looks positive for aluminum. Also, the rise in production of consumer goods from China will keep the aluminum demand high.
Further, the supply surplus will reduce considerably in 2015 as China curtails production at non-performing smelters. Major aluminum producers elsewhere have announced production cuts. The US –based Alcoa plans to cut one-fifth of its capacity by 2015.
The report forecasts that the aluminum price is likely to reach $2,000 per mt by end-2015, which is nearly 12% higher than the current LME price for the metal.