Global Market view on Aluminium

LME three months prices were trading below $2,000/t at the time of writing. Sentiment remains weak amidst the potential turmoil in the Eurozone caused by the gridlock in Italian general elections, the US government sequester coming into effect on March 1, and disappointing data out of China. In the USA, distributors are experiencing a lackluster first quarter, and bad weather is also impacting construction activity. The star performer remains the transportation market. While we expect positive growth in demand for 2013 in North America, risks on the downside have increased. In Europe rolled products activity is steady but activity in the extrusion sector continues to decline, with big falls in demand from the solar sector.

Meanwhile in China, latest PMI data were not as positive as expected in February and the aluminum market remains weak with inventories continuing to rise in warehouses. SHFE prices have also fallen recently with three months prices at the start of March at RMB14,675/t, a 31 month low. If prices remain this low we will also see further closures of high cost capacity in China, although we do expect that demand in China will improve during the year as economic activity picks up. Despite the current somber mood, we believe that the World ex. China will be close to balance this year, or even in a small deficit.