Goldman Sachs predicts a grim future for aluminium

Goldman Sachs Group predicts a not so rosy future for aluminium as aluminium prices are expected to fall along with production cuts after record production levels from the world’s biggest producer. China too continues to add to the world’s aluminium production making surplus a major concern.

The bank states that China “cannot be relied on” to cut back on their production so even a decline in price will not be able to balance out the market as China produces a record amount of 2.59 million tons of aluminium in April, according to the National Bureau of Statistics.

Aluminium average price for three-month delivery is likely to be around $1,800 a metric ton for the year on LME, predicts Goldman while global smelters will consider production cuts when prices drop below $1,875 including regional premiums.

The current “all-in” price is at about $1,980 in Europe, down 23 percent over the past six months, and $2,120 in the U.S. Midwest, down 18 percent, the bank said.

Any deficit in the market will be balanced out by Chinese aluminium exports that are expected hit 5 million tons this year according to Vladislav Soloviev, Rusal CEO.

China’s relentless aluminium production can cause a serious tumble in the aluminium market where prices might crash below the $1,800 mark if China’s domestic demand falls short and supply is not cut outside China.

“Despite China’s high-cost aluminum producers losing money for the past two years, we find that their production has not been declining,” Goldman wrote.