Goldman Sachs sees aluminium price slide as China ups exports

Goldman Sachs expects the outlook for global aluminium prices to deteriorate over the next 12 months as China exports more semi-manufactured metal.

"(The) aluminium market continues to face the greatest bearish fundamental shock in a generation, and perhaps, in its history," it said in a research note.

So far, however, China's daily average primary aluminium output fell to 80,000 tonnes in January, data from the International Aluminium Institute (IAI) showed.

"This is the first production decrease on a year-on-year basis, reflecting Chinese smelters' collective efforts in reigning in oversupply," said Argonaut Securities in a note. It added that recent incentives should reinvigorate the country's construction industry.

"Construction accounts for 35 per cent of production. And it also takes around two-three months for smelters to restart. Therefore, a possible short-term mismatch in supply and demand may help support an aluminium price recovery."

"If you want metal markets and mined commodities to bottom, there are a few things that need to happen, one of which is stability or a lift in oil," said analyst Dan Morgan at UBS in Sydney. Falling oil prices cut the cost of commodity production, also shoring up supply.

"I still think this year that copper is more vulnerable than other commodities. We exited last year with a surplus and we think it will widen a tad this year," he added.