Excess supply will keep pressure on price of aluminium: BHP Billiton

Aluminium producers will have a tough time in near future as there is a huge stock of unused metal in the warehouses keeping the price of aluminium low, the marketing chief of BHP Billiton said.

The LME has approved the storage of above 5 million tonnes of aluminium in warehouses.

The shutdown of smelters and aluminium locked up in various financing deals have squeezed aluminium availability in the spot market. This has pushed the premiums to release aluminium from the storage to around record levels.

This effect has been balanced partially by weaker benchmark prices on LME and has been the only relief to producers said President of Health and Safety, BHP Billiton, Marketing and Technology, Mike Henry.

"While you have a small increase in overall prices it hasn't really been substantial enough to move the needle. You have got 5.4 million tonnes sitting in LME warehouses, a lot more aluminium sitting outside the warehouses and that's an industry that will continue to be challenged for the foreseeable future," Henry said in a press briefing in London.

"You have got a lot more days of inventory in aluminium that you would have for many other commodities. And if prices move up, there is a lot of idle capacity that can be brought back to the market, which would likely cap any sustained upside in prices."

While it will stick to its core divisions such as petroleum, iron-ore, copper and coal, it might deprive some non-core assets such as nickel, aluminium and manganese.