10 APRIL 2013Platts
Deutsche bank finds global aluminium demand 'disappointing'
Edited by : AL CIRCLE
2 min read
Global aluminum demand has been disappointing so far this year but current price levels offer good value, Deutsche Bank said Tuesday in its quarterly commodities comment.
"Continued weakness in Europe has been exacerbated by disappointing demand from China and other emerging/developing markets. Only the US seems to be performing well in terms of growth and this is far from sufficient to meaningfully improve aluminium balances," the bank said.
However, with prices currently trading around $1,900/mt on the London Metal Exchange, Deutsche Bank said that the aluminium market is approaching 'good value'.
"We believe that aluminium appears attractive relative to some other industrial metals, particularly copper," Deutsche Bank said.
It notes that there is still a significant amount of aluminium being stored in warehouse finance deals and that this factor of the market still has some way to go before financing becomes unattractive.
LME warehouse stocks stood at 5,203,150 mt Tuesday.
While the lower prices offer attractive levels for buyers, Deutsche Bank notes that some producers are struggling with cost pressures.
"We estimate that many Chinese producers are significantly cash negative at the current price and several Western producers will be struggling as well," it said.
The bank is also not optimistic for demand moving forward and does not expect to see a significant boost from seasonal factors from an increase in building/construction activity in the spring and summer months.
"This has not been realized however and this 'window' of seasonal buying is quickly closing; in fact we expect that by May there will be little change of seasonally driven strength and the likely catalyst for demand surprise will come, once again, from government policy," Deutsche Bank said.
The bank is forecasting global aluminium production to increase 5.5% in 2013 to reach 50.3 million mt.
Deutsche bank is forecasting an average LME aluminium cash price of $2,035/mt this year.
"Continued weakness in Europe has been exacerbated by disappointing demand from China and other emerging/developing markets. Only the US seems to be performing well in terms of growth and this is far from sufficient to meaningfully improve aluminium balances," the bank said.
However, with prices currently trading around $1,900/mt on the London Metal Exchange, Deutsche Bank said that the aluminium market is approaching 'good value'.
"We believe that aluminium appears attractive relative to some other industrial metals, particularly copper," Deutsche Bank said.
It notes that there is still a significant amount of aluminium being stored in warehouse finance deals and that this factor of the market still has some way to go before financing becomes unattractive.
LME warehouse stocks stood at 5,203,150 mt Tuesday.
While the lower prices offer attractive levels for buyers, Deutsche Bank notes that some producers are struggling with cost pressures.
"We estimate that many Chinese producers are significantly cash negative at the current price and several Western producers will be struggling as well," it said.
The bank is also not optimistic for demand moving forward and does not expect to see a significant boost from seasonal factors from an increase in building/construction activity in the spring and summer months.
"This has not been realized however and this 'window' of seasonal buying is quickly closing; in fact we expect that by May there will be little change of seasonally driven strength and the likely catalyst for demand surprise will come, once again, from government policy," Deutsche Bank said.
The bank is forecasting global aluminium production to increase 5.5% in 2013 to reach 50.3 million mt.
Deutsche bank is forecasting an average LME aluminium cash price of $2,035/mt this year.
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