Aluminium to be range-bound
Recording a growth of about 16 per cent year-to-date, the movement of the spot aluminium prices on the London Metal Exchange (LME) have been robust in the past one year. However, volatility has also been high, triggered by the US’ imposition of tariffs on aluminium import and sanctions on Russian aluminium giant Rusal, which contributes nearly 6 per cent to the global production of the metal.
After the imposition of sanctions on Rusal Aluminium prices rallied beyond $2,600 per tonne, a multi-year high, but slipped back to $2,200-levels in less than a week after the US moved to ease the effect of the sanctions. The metal now quotes at nearly $2,254 per tonne on LME.
Since China accounts for more than 50 per cent of the global aluminium output, any addition of smelter capacities, or any ramp-up or shut-down of plants in the country will have a direct bearing on the aluminium prices.
The metal’s LME price has been moving up, factoring in the supply deficit that would be created due to shut-down of illegal capacities and production cuts in China, to alleviate the environmental impact; but this may no longer hold prices up. Many producers are already reluctant to shut down plants, and are restarting closed smelters to make the most of the current favourable conditions in the sector.
There is a positive correlation between LME aluminium prices and domestic aluminium prices as they move in tandem with the landed prices of aluminium as determined by LME. So users of aluminium, including automobile makers and construction companies, may not see a significant increase in input cost as seen in 2017.