Global aluminium producer Rusal indicated bullish trends in the light metal, mentioned several influential factors that have emerged in recent weeks. Major Four of them are depicted below:
Imbalance in Supply Demand
Aluminium Giant Rusal said that the global aluminium market was forecasted to meet a deficit of about 1.2million tonne in 2014 and an additional 985,000 tonnes in the next year. They also included that there would be expansion in several sites of Rusal. The company added that the beyond 2015, they were seeing a limited opportunities for adding capacity outside China as no new projects were in the drawing board for imminent development and the industry would remain under invested.
The supplier said that within China the demand in 2013 of about 25.5 million tonnes was roughly equal to the production and will grow about 10 percent in 2014. Estimated capacity addition of 2.4 million tonne introduced in the year 2014 had been counterbalanced by the closure of 2.1 million tonnes of capacity due to the uneconomic plant operations. Top of Form
Indonesian ore export ban
Rusal reported that the rally in nickel prices as a part of Indonesian ore export had caused investors to reconsider the effects of reduced Indonesian exports of bauxite in the light metal industry. Above 4 million tonnes of bauxite was shipped to china from Indonesia each month in the year 2013, which made the basis of 10 million tonnes of aluminium production per annum i.e. about 20 percent of global production. But it was just 4 million tonnes so far this year. Thus it is inevitable to seek any alternative source for lower grade, high costs of bauxite to maintain the production of alumina as same as previous years. They are even considering that refineries in China may reserve the stocks for nine months’ metal supply.
Stock Trends
Rusal said that the stock trends of 2014 also supported a significant deficit in the market. LME stocks have decreased by more than 260,000 tonnes since the year start, lowest level in the last 13 months. The on-warrant level is at the lowest level in five years. Deliveries of aluminium from the bonded warehouses are down all over the world. But, Rusal believes that there is no demand for additional metal of warehouse in the market which is in deficit condition.
The company added that the stock trends have also changes considerable in the last 12 months with cancelled warrants, which represents 55 percent of all LME stocks. Rusal said that In Vlissingen and Detroit cancelled warrants represent 72% and 88% respectively, which shows a growing demand for aluminium above and beyond the supplies from the smelters, to both the US and Europe
Price dynamics
Rusal said that the present trading activities for the light metal can be taken as a support for the aluminium sector in the short term basis. They explained that while taking a closer look at the trading in the last three day, the technical resistance was very strong of about US$ 1,850 per tonne and that is a part of long term done trading trend that was last testing in April at about $US$ 1,900 per tonne.
In the last few days the market was supporting twice at US$1,840 per tonne. During last Friday, as the prices moved through US$1,850 per tonne, stops were activated that initiated considerable trading volume, which covers both the previous short positions and new longs creation. This made the market to enter into a very constructive phase. What’s more, the availability of free float and zero premium warrants has decrease by 50 percent since the year start, about 730,000 tonnes. This resulted in a great impact on the liquidity of warrants for short term settlements.
In conclusion, Rusal, the aluminium giant believes that the combination both physical and constructive pricing factors see aluminium entering into new bullish phase that could indicate prices tested at about US$ 1,900 per tonne this week and US$2,000/t in the coming few months.
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