The good thing about the Harbor Aluminum Outlook Summit is the diversity of attendees – however, the better thing is to be able to see the market through the eyes of producers, buyers, metal suppliers and downstream consumers.
The best way to do this at times is through polling. I know, I know, polls can be annoying and silly half the time. But the other half potentially betrays how these parties will act in the latter half of 2013 and into 2014.
For example, here are a few sample questions and answers from a live poll just taken of some 300 attendees on where they believe aluminum prices will be heading.
Over 6 years of surplus, do you think aluminum prices are, overvalued, undervalued or valued fairly?
- 41% said “Overvalued”
- 34% said “Undervalued”
- 25% said “Fairly Valued”
“I expect LME alum prices to average ___ for 2014.”
- 27% said below $2,000/ton
- 63% said between $2,000-2,200/ton
- 9% said between $2,200-2,400/ton
- Only 1% said higher than $2,400/ton
Aluminum spot premiums are high because of:
- 53% said higher freight costs
- 43% said the LME’s unwillingness to amend rules and resultant financing deals
- Only 2% said supply/demand dynamics
- 2% said none of the above
39% of attendees said they expect an average premium of 12-14 cents per pound in 2014
What do you see as the largest threat (to aluminum prices/the aluminum industry) in the second half of 2013?
- 40% said the China demand/manufacturing slowdown
- 29% said a return to recession in the United States
- 17% said the possibility of a deeper recession in Europe
So what are the takeaways here?
A fair amount of bearishness and skepticism appears to prevail in the general mood as far as a 2014 aluminum forecast is concerned.
Not only are prices expected to languish in the low-$2,000 per ton range, but many folks see the LME warehouse financing (“cash-and-carry”) deals as a roadblock to not only getting their metal out, but to lower aluminum ingot spot premiums.
As William Copp, an analyst with INTL FC Stone and LME trader, told me yesterday, “I have no idea what’s next [for the LME regarding the warehousing saga].” Even though Novelis’ suit against the London Metal Exchange is still pending, and cash-and-carry is creeping into copper markets, Copp said, the LME has no immediate plans to address buyers’ frustrations.