At last year’s Harbor Aluminum Outlook Conference, Jorge Vazquez and his team of highly qualified, hard-working data-and-trend-crunchers over at Harbor came together to offer a rather optimistic forecast for aluminum prices in 2012.
The conclusions they came to, based on “technical indicators, industry fundamentals, output economics and prime cycle analysis” put the price of aluminum in a range of $2,350 per ton to a whopping $3,200 per ton.
In the conference’s aftermath, after hearing Novelis’ Erwin Mayr speak, Lisa Reisman wrote here on the MetalMiner blog that “it becomes hard to come to any other conclusion than aluminum prices face far more upward price risk than downside price risk. Of course global economic meltdown, raw material supply constraints,warehousing games and hijinks played by the Big 3 triumvirate of Goldman Sachs, JP Morgan and Glencore (The Wall Street Journal has an excellent primer on the subject right here) along with the dumping of 60m barrels of oil not withstanding, the picture painted by Novelis at the conference bodes well for aluminum consumption.”
Needless to say for many market watchers, aluminum producers and aluminum buyers, Lisa’s first sentence — not her last — is the one that has been truer for 2012 aluminum prices.
LME prices have barely hit Harbor’s low-end of their aluminum price forecast, coming in March, but downward slides characterize most of 2012 so far: the year began sub-$2,000 per ton, rose then took a sharp drop at the end of January, then began a steady downward trend into the spring — flirting with the $2,300 per ton level before heading below $2,000 again the past several weeks.
Meanwhile, Chinese cash prices of aluminum have hardly broken outside the $2,500-$2,600 per ton range.
Global aluminum supply has not really seen the constraints necessary to rein in the price at all over the past quarter; in fact, aluminum LME inventory has jumped significantly in first few months of 2012. (For a more detailed rundown on why this is, check out MetalMiner’s analysis on the topic.)
Of course, global industrial demand has slowed to a nearly glacial pace, since China, India and the European Union have all had their separate and interrelated woes regarding growth slowdowns and debt concerns.
However, a pair of Goldman Sachs reports released yesterday pointed to better returns for investors. “Crude, gas, copper, aluminum and gold are the bank’s top picks,” according to Bloomberg. A separate report detailed a revised, lower forecast for aluminum — $2,200 a ton from $2,400 a ton — for the next three months.
Where to go from here? Will aluminum prices stay below the psychologically critical mark of $2,000 for much longer (as the LME price is this week so far?) Let’s see, as Harbor’s 2012 Outlook Conference begins its main day today.