According to Bloomberg News on December 26, the global aluminum market is facing a record supply surplus. Despite this bleak outlook, some analysts believe that rising demand and logistical delays could still push prices higher in the near term. Barclays has advised investors to sell, while Morgan Stanley has called aluminum the worst-performing commodity in recent years. However, with a lag between production and delivery, the market might not be as affected as expected.
Barclays forecasts that aluminum stockpiles will continue to grow over the next four quarters, potentially reaching 8.67 million tons by the end of 2013. This surge is driven by increased production from China and other regions, leading to the highest supply-demand imbalance since 2009. Meanwhile, the median forecast from 29 Bloomberg analysts suggests that aluminum prices could climb 16% to $2,400 per ton in 2014.
Analysts are optimistic about price increases due to the time it takes for aluminum to move from storage to consumers. Major warehouses in Detroit and Vlissingen hold most of the world’s aluminum, but it often takes up to a year before it reaches buyers. Credit Suisse estimates that 80% of LME-tracked aluminum is tied up in contracts, making it inaccessible to many. As a result, some companies are forced to pay hefty premiums to secure supplies.
“I think the tight market situation is man-made, driven by trade practices,†said Jeremy Baker, who oversees $850 million in commodities at the Vontobel Belvista Commodity Fund. “From a fundamental perspective, aluminum is one of the least attractive metals due to its oversupply.†Despite these challenges, the combination of delayed deliveries and strong demand continues to support price growth, creating an unusual dynamic in the aluminum market.Aluminum Door Handle On Aluminum Rosette
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