17 DECEMBER 2013agmetalminer.com
Aluminum Outlook for 2014 is still not bright
Edited by : AL CIRCLE
1 min read
One of the toughest markets to read direction for has been aluminum and next year, consumers will not be pleased to hear, it does not look much better.
In most other markets, massive over-supply would result in prices falling to the point where marginal suppliers throw in the towel and supply becomes constrained sufficiently to support a recovery in prices. Market economics, if you like, come into play and balance out supply at or above breakeven.
Not so in the aluminum industry since the financial crisis.
Massive overproduction, predicated on the back of strong growth in demand earlier this decade – growth, incidentally, that has continued in positive territory in spite of the financial crisis – has continued to bring new capacity on-stream even as loss-making older plants have been shut down.
What has been different about aluminum’s story compared to most other metals is that a black hole has been largely swallowing up the excess production, creating enough demand to support prices around the marginal cost of production.
In most other markets, massive over-supply would result in prices falling to the point where marginal suppliers throw in the towel and supply becomes constrained sufficiently to support a recovery in prices. Market economics, if you like, come into play and balance out supply at or above breakeven.
Not so in the aluminum industry since the financial crisis.
Massive overproduction, predicated on the back of strong growth in demand earlier this decade – growth, incidentally, that has continued in positive territory in spite of the financial crisis – has continued to bring new capacity on-stream even as loss-making older plants have been shut down.
What has been different about aluminum’s story compared to most other metals is that a black hole has been largely swallowing up the excess production, creating enough demand to support prices around the marginal cost of production.
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