INTERVIEW-Aluminium, nickel and zinc need output cuts-B Hunt

* Total reported aluminium stocks yet to peak * Copper has brightest medium term prospects * Metals demand growth seen subdued in 2010 By Karen Norton LONDON, Oct 16 (Reuters) - Global prices for aluminium, nickel and zinc will have to correct lower at some point to force producers to curb output and eradicate massive surpluses, industry consultants Brook Hunt told Reuters. "There could be trouble ahead for aluminium, nickel and zinc. Ultimately it comes down to over supply," Julian Kettle, head of metals research at Brook Hunt, the metals arm of consultancy Wood Mackenzie, said in an interview. Kettle said total reported stocks of aluminium stood at 95 days of consumption and he expected them to peak next year at 110 days worth. Nickel inventories were already at over 100 days of demand, he added. Metals prices, hit by the slump in demand in the latter part of last year, did not stay low for long enough, he said, encouraging producers to restart capacity they had idled at the depths of the global economic recession before it was needed. "Aluminium has a huge supply overhang, but rising prices. That's a problem for the industry as low prices are the corrective mechanism. It's the same for zinc and nickel," Kettle said. Brook Hunt estimates that around 95 percent of the aluminium industry is cash positive producing aluminium ingots at current prices. At 1030 GMT the London Metal Exchange (LME) three-months price was indicated at $1,910/20 a tonne. COPPER TO FALL The copper market will also remain over-supplied next year and prices will fall, but unlike some other metals the picture looks brighter over the medium term, Kettle said. "There is significant stock in the system, but it will be drawn down as demand recovers. Further ahead there is a lack of projects being developed, which is expected to boost prices." Brook Hunt expects aluminium prices to fall from current levels in 2010. It predicts an average price for next year of $1,700 a tonne, indicating that it will trough lower. "If the fundamentals are to prevail prices have to go significantly lower to precipitate cutbacks," Kettle said. He said that, historically, 40 percent of the aluminium industry had to be cash negative for at least a year to force that to happen. Prices would need to fall to $1,250 a tonne for this to be the case. "But do I think prices will go there? No." The consultant expected demand growth across the industrial metals to be subdued next year. On metals specifically, Kettle said aluminium consumption would not see double digit growth next year, in contrast to the period after the 1974/75 recession, when consumption last endured such a sharp decline. Brook Hunt estimated demand for the metal will drop by 7.5 percent this year. It forecast a 7.2 percent rise in consumption next year. "Aluminium is in structural imbalance. Strictly looking at supply capacity versus demand there's sufficient supply in the system out to 2014," Kettle said. (Edited by William Hardy)