18 JULY 2012Commodityonline.com
Goldman Sachs reports bullish trend for Aluminum in next 3 months
Edited by : AL CIRCLE
1 min read
Goldman Sachs is constructive on aluminum over the next three months, seeing upside potential to $2,200 a metric ton, thus favors purchasing September London Metal Exchange calls with strikes up to $2,150.
According to Goldman, “Over the past month, aluminum has come under pressure following the news of some Chinese smelters subsidies in some provinces (including the major smelting province of Henan).”
However, Goldman estimates that some 20% of Chinese smelter output is still losing money on a cash-cost basis.
They continued that, “taking into account the smelters losing money at current prices outside of China, we estimate that the aluminum price is trading around the 75% percentile of the global cash-cost curve.”
The bank looks for limited global aluminum supply growth in the second half in a moderately rising consumption environment.
“The overcapacity and high stock levels which would likely cap aluminum prices are not issues that would restrict a temporary but significant price rally, since inventories are tied up in ‘financing deals’ (illustrated by record-high physical premia ex-China despite very high LME stocks), and since it would take at least two months to ramp up Chinese production capacity in response to a price rally,” Goldman concluded.
According to Goldman, “Over the past month, aluminum has come under pressure following the news of some Chinese smelters subsidies in some provinces (including the major smelting province of Henan).”
However, Goldman estimates that some 20% of Chinese smelter output is still losing money on a cash-cost basis.
They continued that, “taking into account the smelters losing money at current prices outside of China, we estimate that the aluminum price is trading around the 75% percentile of the global cash-cost curve.”
The bank looks for limited global aluminum supply growth in the second half in a moderately rising consumption environment.
“The overcapacity and high stock levels which would likely cap aluminum prices are not issues that would restrict a temporary but significant price rally, since inventories are tied up in ‘financing deals’ (illustrated by record-high physical premia ex-China despite very high LME stocks), and since it would take at least two months to ramp up Chinese production capacity in response to a price rally,” Goldman concluded.
Previous article
Indian Aluminium biggies avoid output cut depite the present global trend
Next articleGovt to select consultant for preparing National Aluminium Plan: Mining Secretary
Grow with
AL Circle
