Aluminium Prices May Go Up 10% To $2,800 In Medium Term.

Tracking crude oil, which is set to increase on the back of rising demand from emerging economies and supply concerns, global aluminium prices are expected to rise in the near to medium term.

According to industry experts and analysts, aluminium may rise to $2,800 a tonne in a year from the present level of around $2,550 a tonne.

“Compared to other base metals like copper, aluminium is still a laggard on the London Metal Exchange (LME). Given the demand-supply scenario, prices should rise in the medium term,” Ansuman Das, director (commercial), National Aluminium Company Ltd, said. He added that rising crude oil prices would support the overall trend on pricing.

Crude oil prices, ruling around $98 per barrel on the New York Mercantile Exchange, expected to rise further, as supply issues persist due to political disturbances in some oil-producing nations in West Asia and Africa. Recently, Barclays Capital pegged the average annual price forecast for Brent in 2011 at $112 a barrel and increased its estimate by $10 to $115 a barrel for 2012.

“Oil prices will see an upward trend due to rising demand in the emerging economies, along with supply concerns due to geopolitical factors. This will, in turn, push aluminium prices up, as energy constitutes 30-35 per cent of the input cost of aluminium manufacturers,” Sandeep Jain, an analyst with Karvy Comtrade, said.

According to broking house estimates, oil is expected to hover around $105-110 a barrel and the price range for aluminium will be $2,350-2,800 a tonne in the next six months to a year. Jain added that higher energy cost for aluminium manufacturers would support rising price levels.

“At present, electricity generation companies in China are raising prices to cut losses. This will soon be reflected in the manufacturing cost of the metal. Logically, companies will pass on this cost to end-consumers, that will push prices in future,” he added.

Besides demand from emerging economies, factors like expectation of the US economy doing well along with a solution to the European debt crisis would also favour the pricing environment. “According to our estimates, the US economy will see better growth in the second half of the year. Also, Greece’s bailout by the European Union and the International Monetary Fund (IMF) will drive demand growth in the euro zone,” Jain said.

However, everyone is not so bullish on pricing, as it is expected to be range-bound, with the market lacking any visible trigger. “Prices should remain in the range of $2,450-$2,550 a tonne, despite double-digit growth seen in the emerging economies,” Mukesh Kumar, chief operating officer, Vedanta Aluminium, said.

He added that oil prices would not be able to drive aluminium, as major players were shifting to a coal-based gasification system for their energy needs. Kumar also said the euro zone crisis would have an impact on the overall demand scenario in that region.

Source : Sify.com