S&P lowers aluminum price assumption for 2012 second quarter to $1,980/mt

Standard & Poor's Ratings Services has lowered its price assumption for aluminum to $0.90/lb ($1,980/mt) for the rest of 2012, from $0.95/lb ($2,090/mt) in January, the company said last Thursday in a report.

S&P attributed the move to an 11% decline in aluminum spot price since January, which it linked to oversupply and the uncertain global economic outlook. Aluminum prices were also under pressure from the strengthening US dollar and concerns about China's demand growth, the ratings firm said.

S&P's said it price assumption for 2013 was unchanged at $0.95/lb, because current spot prices are already close to cash costs of major producers and below those of many high-cost smelters. "Still, large inventories --including up to 70% tied up in financial deals according to some industry experts -- create a pronounced risk for prices," the report said.

Last week, Barclays Bank also downgraded its aluminum price forecast for the second half of the year by 7%, although its revised projection and that for 2013, were over 7% and nearly 9% above S&P's, respectively.

Barclays trimmed its figure for the balance of 2012 to $2,125/mt, followed by $2,450/mt in 2014 and $2,700/mt in 2015.

Barclays said going into 2013, robust production trends in China, India and the Middle East were expected to offset production constraints in higher cost locations such as Europe, US and Australia. "We project a modest surplus [for 2013]," the bank said.

S&P said it had left its price assumption for 2013 unchanged because it was assuming a soft landing in China, where it forecast GDP growth of about 8% annually in 2012-2013. S&P also assumed flat GDP in Europe and about 2% growth in the US for 2012.