Bank of America Merrill Lynch cuts 2015 price forecast for Aluminium to $1,800 a ton

Bank of America Merrill Lynch has cut its this year price forecast for aluminium to $1,800 a ton and remained unchanged for 2016.

Bank of America Merrill Lynch previously mentioned that gold prices to average $1,818 a ton this year and $1,850 a ton for next year.

Aluminium has been among the best performing metals since the beginning of 2014. Of course, this was heavily influenced by substantial output curtailments from operators in World ex-China. Yet, exports of semis from China increased in recent months, halting the rally on LME. 

While the aluminium market in World ex- China remains in deficit, we remain cautious until Chinese product shipments subside. Meanwhile, trading on LME is normalising, which has pushed premia lower. 

Premia remain above fair value, so Bank of America Merrill Lynch expects further downside. Incidentally, lower premia have made Chinese semi exports less economic, so there is scope for China’s producers to dump less material onto international markets.

In Bank's view, the headwind to prices was driven by a confluence of factors, including the following:

--China has continued to export substantial tonnages of semi-finished products. Of course, while the majority of these semis are genuine, some really are primary aluminium disguised as a product to attract tax rebates.

--In addition, queues at LME warehouses after the Financial Crisis contributed to a substantial tightening of the physical market. Yet, trading on the exchange has gradually normalised.