Aluminium makers expect prices to pick up even as supplies stabilise

Topics aluminium

Indian aluminium producers are hopeful of prices strengthening on the London Metal Exchange (LME) in the rest of this calendar year. Aluminium supplies have stabilised after the lifting of sanctions on Moscow-based UC Rusal (the world's second largest producer) by the US government. 

Also, the decks are now clear for Norsk Hydro’s Alunorte refinery in Brazil (the world’s biggest, operating at half capacity since early 2018, when Hydro admitted it had made unlicensed emissions of untreated water) to operate at peak rated capacity. Even so, 2019 will see a shorage of 1.5-1.7 million tonnes.

"Therefore, we are expecting LME prices of aluminium to show an upward trend in the (year's) second half,” Satish Pai, managing director, Hindalco Industries, said at the company’s recent earnings conference call.

According to a World Bank commodities report, aluminium prices on the LME will average $1,940 a tonne in 2019. These are currently driven by global macro economic uncertainty and the festering trade conflict between America and China. As a fallout, LME prices are down about 20 per cent year-to-date, at $1,809 a tonne. These had rocketed to $2,246 a tonne in April 2018, after the US curbs on UC Rusal, triggering panic in supplies.

Demand for primary aluminium has been fuelled by China’s planned curbs on scrap import. By 2020, China aims to completely ban import of scrap and metal waste. In India, demand growth is forecast to be robust at seven to eight per cent. The construction and packaging sectors are billed as the big demand drivers. The flat rolled products market is also growing at a steady pace of seven to eight per cent annually, spurred by transportation, construction and packaging. This growth is expected to continue over the next five years.

In its base metals industry outlook for this financial year, CARE Ratings has predicted growth of 3.7 per cent in primary aluminium production. 

The Union government proposals for development of Smart Cities, rural electrification and a focus on renewable energy projects will support this.

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