Major aluminum market developments in September

Aluminum prices were pounded in September by growing concerns for global demand prospects and while the market has steadied above those lows, some analysts expect it to fall back to levels where producers will start to curb output.

Mr Will Adams analyst of Fastmarkets said that "I think metals prices generally will move up in the next week or so but after that they'll fall again. He unconvinced that efforts to deal with the euro zone debt crisis will succeed. Were aluminum prices to fall to USD 2,000 per tonne to USD 1,900 a tonne market watchers would start to talk more seriously about cutbacks.

The London Metal Exchange three months aluminum price was last indicated at USD 2,224 per tonne. Earlier this month the market fell to USD 2,130 per tonne it’s lowest in around a year.

Mr Neil Buxton research director of Thomson GFMS said that the level of any supply response would not have a marked impact unless one of the world's top producers such as Alcoa or Rio Tinto Alcan acted. Instead he thought it likely that attention would focus more on inventory levels and demand.

He said that at times of a weaker demand environment people focus more on stock levels and even though LME inventories may be tightly held that influence quickly dissipates.

But Barclays Capital held a more upbeat view on the potential influence of supply factors. We believe aluminum can offer a good defensive position given that further price downside is likely limited by the proximity of prices to production costs. At current prices, we estimate as much as 25% to 30% of global production is losing money.