The French Bank Natixis in its latest research report forecasts LME Aluminium price to average around $1,840 per mt in 2015. The prices are likely to move higher in 2016 to average around $2,000 per mt.
In its metals review for H1 2015, Natixis forecasts a tug of war between positive and negative factors in aluminium market over the next few years. The bank indicates several positive factors that may favor the aluminium market.
The biggest bullish factor for aluminium is the expected robust demand growth from automotive sector. Also, any shortage of bauxite mat lead to rise in alumina prices. In addition, limited excess supply from China may augur well for the commodity prices in the years to come.
On the other hand, Natixis forecasts excess aluminium inventories to stay at least until 2018, which may lead to further fall in premiums. Also, strengthening dollar may turn out to be a negative factor for aluminium along with other commodities in general.
Natixis also points out a number of upside and downside situations that may have bearing on the above price forecast.
In an upside scenario, acute shortage of bauxite may further tighten alumina supplies. Intervention by Chinese authorities on export rules and adjustment of VAT refunds may limit exports of semi-processed aluminium products out of China. The idling of loss making aluminium smelters across various provinces may limit excess supply. In such a scenario, the aluminium prices may average around $2,000 per mt in 2015 and increase further in 2016 to average around $2,250 per mt in 2016.
A sharp fall in aluminium premiums could make more metal available. Boost in low-cost aluminium production by China and increased Russian output on account of weak ruble may result in more available in the international market. In such a scenario, the average prices are likely to fall to $1,700 per mt in 2015 and 2016, the bank said.