The Quarterly Analysis and Forecast report on Aluminum published by FastMarkets and Sucden Financial forecasts elevated prices and premiums during the third quarter of the current year primarily on account of restricted supply of the metal.
According to the report, the downward trend in Aluminum has ended in early-February this year when the prices touched the bottom of $1,671.25 per tonne. Since then, the prices have been moving in an upward trend. The trend is expected to sustain during Q3 2014. However, forward selling by marginal producers are likely to keep the prices capped in the range of $2,000 per tonne.
The effect of closure of existing facilities is likely to be offset by the new capacities in the Middle East region. Some local governments in China too are seen focused on restarting idled capacities. The production from China will remain surplus, but those from Western countries are likely to drop. The Indonesian export ban, if persists, may affect aluminum production as Chinese bauxite stockpiles are expected to get depleted by early-2015. However, the impact of this will be seen only in 2015, FastMarkets states.
The report also states that aluminum demand will remain robust during the quarter. The metal is expected to win more market share from copper and galvanized steel. It also rules out risk of aluminum shortage in the medium term. Also, the production is expected to remain price-elastic.