Analysts said at the 2009 ISRI Convention & Exposition in Las Vegas that in the light of low demand, the aluminum industry needs to see further production cuts and the surplus start to shrink.

Mr John Tumazos president of John Tumazos Very Independent Research and Mr William Adams research analyst at Basemetals.com projected that demand and price recovery on the LME will be slow and steady.

Mr Adams said that "We entered the year awash with metal at a time when demand was slowing rapidly, so we can't expect a quick recovery. It will be especially slow because of the global economy."

Mr Tumazos said that "I think the key indicators looking forward are restraint in aluminum smelter output, the cancellation of aluminum plant construction, plus looking at new automotive sales and housing construction worldwide."

Mr Adams projected an aluminum surplus of 2 million tonnes and an average price of USD 1,300 per tonne in 2009, well below the average price of aluminum from 1980-2008 which was USD 1,634 per tonne. He added that "We've had a very fast and furious adjustment in the last six to nine months. Today's prices are 20% below the long term average. The outlook is very hazy. Don't expect a quick fix or a strong rebound. Debt is very high and companies are still laying off. All in all there is little room for optimism, other than in China."

Mr Tumazos said that "Looking forward, demand looks very weak, as first quarter automotive sales were down by 40% YoY and housing starts in March plummeted by 48% over last year's figures."

Assessing stocks in LME warehouses, Mr Adams said that in the early 1990s LME stocks increased to 2.6 million tonnes, while stock levels are approaching 3.8 million tonnes. He said that "So there is an excess, or a very large amount of stocks."

(Sourced from www.platts.com)