From a major slump in both demand and prices just 12 months ago, aluminum has made an amazing recovery. All the more amazing because at the same time as achieving a near doubling in price, inventory levels have also doubled since late 2008. Prices have increased more than many forecasters anticipated 12 months ago as both Chinese demand and the squeeze on physical availability by long term finance deals have combined to create a false scarcity of material in a market in surplus.
Back in late 2008, we wrote a research report for a major US industrial manufacturing client in which we made the following prediction for aluminum prices:
Source: MetalMiner Research
A little over a year later, we pulled out the report to see how our predictions compared to reality and the median prediction matched prices at the beginning of January 2010. Naturally we have seen some volatility either side of that line along the way with the dip in early 2009 as the most severe. But once calm returned after the panic of early 2009, the price moved back to our trend line by mid-year.
A range of factors has influenced and will continue to influence the market going forward. These factors include: inventory levels, production costs, market supply and demand but also the activities of investors in the exchange traded commodities markets and the ongoing economics around long term financing deals. As consumer of 39% of the world’s aluminum, China will play an integral part of this mix.
MetalMiner’s 2010 aluminum price perspective series provides additional insight into the aluminum market. The report includes a detailed analysis of input costs, a one year forecast (similar to the chart above), a deeper dive into the dynamics behind supply and demand as well as a section outlining the key road signs to watch throughout the year.
Readers can learn more about MetalMiner’s Aluminum Price Perspectives series here.