Japanese trading house Sumitomo Corp. (8053), which has stakes in smelters from Brazil to Australia, forecast aluminum will swing into a deficit next year for the first time since 2006 as lower prices accelerate output cuts.
Global demand will outpace supply by 37,000 metric tons from a surplus of 312,000 tons estimated for this year, said Shingi Yamagiwa, manager of light metals trading at the Tokyo-based company.
Aluminum prices are down 18 percent over the past year on the London Metal Exchange. Top producers including United Co. Rusal (486), Rio Tinto Group and Alcoa Inc. (AA:US) have announced output cutbacks. China has tried to curb the capacity of its plants that account for almost half of world output, weighing down prices in a market that’s over-supplied.
“Western producers will continue to cut output, while China will adjust its production soon as the price of electricity pressures high-cost smelters,” Yamagiwa said in an interview on Feb. 7.
The metal touched $1,671.25 a ton Feb. 3, the lowest price since July 2009. The contract for delivery in three months was little changed at $1,717 at 3:17 p.m. in Tokyo.
Global aluminum demand may exceed output by 390,000 tons this year, Macquarie Group Ltd. said Jan. 9, as demand improves and output is curbed amid unplanned closures and bankruptcies. Deutsche Bank AG forecast a 5.6 percent increase in global use of the metal this year in a Jan. 14 report, with China’s demand growth at 9.5 percent.
BHP Billiton Ltd., the world’s biggest miner, said Jan. 17 that it may cut as many as 450 jobs amid plans to close its Bayside aluminum smelter in South Africa.
Sumitomo shares rose 0.7 percent to 1,292 yen in Tokyo, the highest close since Jan. 29. The shares gained for the fourth straight day.
Premiums buyers pay for aluminum in the U.S. Midwest were at 20 cents to 20.5 cents a pound ($420-$431 a ton) from a record 20 cents to 21 cents a pound in January, Harbor Intelligence said Feb. 4. The surcharge is added to the price for immediate-delivery metal on the LME.
Supply cutbacks, limited scrap supply and an increase in orders also helped boost the premiums, according to Wood Mackenzie Ltd.
Premiums to Japan are expected to jump to a record $375 a ton in the third quarter from around $255.5 this quarter on soaring fees in the U.S., Yamagiwa said. The fee is settled on a quarterly basis in Japan.
Record LME inventories, of which the majority is locked in financing deals, also supported the premiums, Yamagiwa said. Aluminum stockpiles tracked by the LME reached an all-time high 5.49 million tons on Jan. 16.
As much as 80 percent of stockpiles may be tied in transactions that make the metal unavailable to buyers, according to Societe Generale SA. Consumers including brewer MillerCoors LLC said last year that lengthy waits for metal inflated costs by $3 billion.
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