|Gulf Aluminium Council (GAC) is a coordinating body that represents promotes and protects the interests of the aluminium industry within the Gulf. In a conversation with AlCircle,|
An interview with Mr Edward Meir -Senior Metals Analyst, INTL FCStone Inc
Mr Ed Meir is an Independent Commodity Consultant to INTL FCStone and a long-time collaborator with Italian-based International Commodities Club FARO. Mr. Meir has been in the commodities business for about 30 years in various capacities. After getting his BA in Economics from McGill University and his MBA from New York University, Mr. Meir started his career as a futures research analyst covering the sugar, coffee, and cocoa markets. He then spent the next 18 years in the physical markets, trading aluminium, tin and steel. Mr. Meir was ranked by Metal Bulletin as the #1 overall base metals analyst in 2011, 2014 and 2015 and was ranked number #2 in precious metals in 2014 and #3 in 2013.
He discussed trends in the global metal market and more specifically in the aluminium market with AlCircle and ArtValley team during Metef 2017 at Verona, Italy.
Here is an excerpt from the interview:
Q: What is your outlook for aluminium in six months?
Mr. Meir: Six months from now would be the winter season for China and the Chinese government has announced that by then, they would cut about 3.3 million tonnes of aluminium production in 28 cities in Northern China in order to reduce excess capacity and to control pollution. Another 2 million tonnes of capacity would be cut on account of technical irregularities, like the absence of permits. If this comes to pass, about 5 million tonnes of capacity would be cut and this is expected to have a significant impact on prices. The aluminium price has been trending higher lately just because of expectations that the Chinese will cut, so we will see what happens.
The capacity cuts are not easy. They involve inspection from the local government, which is time consuming, and producers could take up rectifying measures in case of technical irregularities. Producers may also appeal production halts. Cuts will also have to be weighed against the fact that people will lose their jobs and so the government will have an economic dilemma on its hands as well. So all this makes forecasting difficult, but if China cuts by the amounts proposed, we could see prices going up to USD 2,100/t or higher. If we don’t get any cuts, we could get to USD1700/t.
Q: If the capacity cut happens, how long will it take to overcome the overcapacity considering the current state of Chinese demand?
Mr. Meir: It remains to be seen. The demand situation in aluminium is good in China as well as in the world, growing roughly between 5%-7%, but the Chinese still produce too much metal. So far, they have been exporting whatever they have not been able to produce locally.
Q: What is the trend in aluminium in other countries?
Mr. Meir: Aluminum demand is strong internationally as well, but Chinese demand is the biggest component (some 50%) vs. 8% for the US. One fact about aluminium demand is that it is one of the fastest growing metals in terms of consumption, but its price appreciation has been among the slowest.
Q: When it comes to the applications of aluminium which sector do you think is boosting the aluminium consumption?
Mr. Meir: Aluminium demand in automotive is growing much more in North America than in Asia. Due to strict fuel standards automakers are using more and more aluminium in the cars to make them lighter. However, the steel industry is to face this threat. The steel sector is making lightweight, high performance steel, because they do not want to lose the market share. So, there will be a war between these two prime metals. Another sector in which, the use of aluminium is growing is construction. In China, power grid sector is shifting to aluminium cables from copper due to its lower cost. That could be a possible area which could boost demand for aluminium in the country.
Q: Which market in your view has seen remarkable growth in aluminium?
Mr. Meir: Well, China has grown significantly in production as well as in consumption. As mentioned earlier, the country currently consumes more than half of the entire aluminium production (about 32.5 million tons a year). Europe, North America and India consume much less. But India has potential to grow its consumption in the coming years.
Q: What is your view on the other metals under LME? How are they performing?
Mr. Meir: We keep a close watch on copper, zinc, lead, nickel, tin as well as aluminium. Most of the time, all these metals tend to move together and we saw this most clearly during the beginning of 2017 when Trump came into power, leading to expectations of a “pro-growth” agenda. This expectation was clearly exaggerated given what is instead going on in Washington.
Q. Do you think there are good market opportunities for non-Chinese companies manufacturing technologically advanced machines to sell to Chinese producers that need to improve their industrial process and make it environmentally cleaner?
Mr. Meir: There is a huge demand for technologies in China which upgrade the supply chain and make them more efficient and green. However, supplying high-end technology to China always invites the threat of product copying.
Disclaimer: “The information presented herein is neither intended nor implied to be a substitute for professional advice. The views and opinions shared in the interview section of www.alcircle.com are unique to the interviewees and do not necessarily reflect the viewpoint of www.alcircle.com."
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