Aluminium is headed for an “extremely” volatile period, says Rio chief

Aluminium started the year 2017 on a positive note. The light metal traded on the world's biggest commodity exchanges experienced a steady rise till it hit the two-year high of US$1,963 per tonne on March 30. Since then, the uptrend seems to have somewhat lost its steam. Rio Tinto Group chief executive Alfredo Barrios said in a recent interview that the lightweight metal is heading for an “extremely” volatile period.

The market is eagerly looking at China as it endeavours to check pollution caused by its domestic aluminium industry players. The uncertainty over when the Asian giant will curb the production of the metal is actually helping to keep the investors on edge. Barrios said, "There’s no doubt that if you look at the supply side, if you look at the environmental issues, sooner or later that will change. But when- is a question mark."

“There’re a number of factors which will dampen any price increase if it goes too far,” he said. “If you look at what are the fundamental reasons behind why prices are where they are, and how different they are from a year ago, it’s sometimes very difficult to see what has made aluminium be higher at all. What’s changed so radically in the last year?”- questioned Barrios.

Despite reports saying China has ordered aluminium output cuts in major production hubs, inventories on the Shanghai Futures Exchange (SHFE) have continued to rise. These overcapacity and high inventory levels are likely to put a lid on the recent gains in the aluminium price.

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However, Barrios remains optimistic about the long-term demand outlook of aluminium. He said aluminium industry growth in the next 15 years will equal what the sector has experienced in the past 4 decades!

“We’re very optimistic on the demand side for North America, and I think everybody continues seeing demand growth, be it in China, be it other markets as well,” Barrios added.