The primary aluminium price gave back some of its recent gains the previous week at the LME as the weakness of the oil price spread through base metals, sparking liquidations which led the light metal lower. The breach of the $2,800/mt mark proved unsustainable with the primary aluminium price trading closer towards the $2770/mt level at the end of the week.
According to the Ministry of Finance, China will raise export taxes on many types of metals as part of an ongoing crackdown on over-investment in resource-intensive industries such as the primary aluminium sector. The export tax on copper, nickel, aluminium and other metal products will be raised to 15%, while import taxes on alumina and other natural resources will be reduced to between 0 and 3%, from their current levels of 3 to 6%. China's net exports of primary aluminium continued to creep higher in September, according to the latest trade report from the country's customs department. Net exports were 66,500 tons in September, the third consecutive monthly increase and a new monthly high for 2006.
On Monday (30/10) the primary aluminium price ended at $2,796/mt, while on Tuesday edged higher to $2,810/mt. The light metal retreated to $2,781/mt on Wednesday's session, moving further down to 2,748/mt on Thursday. Friday (03/11) saw the primary aluminium price moving higher to $2,770/mt.
September: Market Research
After the summer slowdown and the overall steadier performance of the primary aluminium price in August, the light metal welcomed the beginning of autumn with an impressive upwards spike, which signalled the widening of the trading range and the passage to a more unstable behaviour till the end of September. The climb over the $2650/mt mark was mainly aided by the renewed buying interest of funds and the pick up in the physical market but it didn't last for long. Shortly after the primary aluminium price sharply plunged, trading near the $2400/mt resistance levels.
The free fall near the danger zone stopped when a World Bureau of Metals Statistics (WBMS) report confirmed that the market was in deficit for the first 7 months of the running year. The primary aluminium price ended the month at $2587/mt, with the market turning its attention to decreasing LME stocks. The monthly average price in September recorded just a marginal increase from August levels, reaching $2517,52/mt.
On a fundamental level, two parameters apply downside pressure to the primary aluminium price. On one side the falling alumina prices and on the other side forecasts that supply will recover and primary output will grow in the future, changing the supply-demand balance of the market. For now, one thing is for sure, the raw material required in aluminium production as well as being widely available, is relatively very cheap too.
Alumina production in China was 8.3 millions tons in January-August 2006 according to the National Bureau of Statistics, posting an increase of 51%. According to an Antaike analyst alumina production is estimated to reach 14 millions tons in 2006, with capacity increasing to 20 million tons. The Chinese company Chalco, which is the second biggest producer of alumina in the world, announced recently further price cuts. It is the third time in the last two months that the Chinese company reduces the alumina price, which is now $372.8/ton, decreased by 22.4% from previous levels of $479.41/ton. Analysts estimate that there is still room for further cuts and that it is possible the alumina price to drop even under $200/ton in the future.
The fact that alumina is widely available and its price is on the slippery slope, inevitably will lead to primary production increases in the future, as producers try to get advantage of this situation. So far market data proves otherwise as aluminium production is heading lower in certain regions like North America and Europe but in the mid-to long-term future things are more likely to change.
Primary production in North America recorded a 5.6% reduction in
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