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06 NOVEMBER 2015 AL CIRCLE

Aluminium remains a structurally challenged market, more curtailments necessary: BofAML

1MINS READ
LME aluminium prices though inched up higher this week, it is still a far cry from where it can pacify aluminium producers in major markets globally. According to Bank of America Merrill Lynch, while China’s aluminium exports have now stabilised somewhat, headwinds to aluminium quotations may persist near term, especially if some market participants release working capital and dump unreported stocks into LME warehouses.

“In this scenario, which we believe is possible, aluminium may fall to $1,200/t (54c/lb),”BofAML says.

The sustained pressure on aluminium prices suggests that more than 50% of smelters globally are not profitable. Historically, this has prompted production curtailments. Some producers have already announced their plans to cap production; however, the crisis situation clearly suggests that the initiatives are still not adequate.

BofAML says aluminium remains a structurally challenged market and more capacity closures are essential; indeed, if all capacity that is marginal at $1,700/t (77c/lb) was cut, aluminium would be in good shape fundamentally.

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Aluminium Price China Market

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