Reuters reported that aluminum prices fell in December as demand worries weighed and while a handful of production cutback announcements have since lent the market a steadier tone, lackluster demand is seen likely to limit moves higher near term.
In early January, Alcoa Inc announced it was cutting its global smelting capacity by 12%. Although the figure included permanent closure of a substantial amount of already idled capacity, it helped sentiment, which was underpinned further by Norsk Hydro's announcement of plans to curb output at a struggling smelter in Australia.
Mr Will Adams analyst of Fastmarkets said that "The production cutbacks are supportive, but demand is not strong enough to warrant higher prices. I see the market trading sideways near term."
Barclays Capital said that the estimated non China production capacity cuts announced in the past month total 1.3 million tonnes per year and have helped reinforce cost support for aluminum prices.
This figure includes 292,000 tonne per year of capacity that had not been producing since 2009 around 342,000 tonne per year of non price related closures and 85,000 tonne per year of delayed production ramp ups.
Many analysts are somewhat cautious as to how high prices can go. They said that it's difficult to see a big run up in prices. If they go up too far, everyone will turn production again.
Below are some of the more significant recent developments in production and prices that may influence the direction of the market in 2012.
Production;
December 20 - Provisional figures from the International Aluminum Institute showed that daily average primary aluminum output in China rose to 48,900 tonnes in November from 48,100 tonnes in October.
December 20 - Daily average primary aluminum output in November dropped to 70,700 tonnes compared with revised 70,900 in October and 68,600 in November 2010.
December 19 - Dutch primary aluminum producer ZALCO was looking for a buyer to restart its plant which was shut on Dec. 16 due to lack of funds after the company filed for bankruptcy.
December 15 - A power cut at Rio Tinto Alcan's Lynemouth aluminum smelter in northeastern England has knocked out one of the plant's production lines and partially curtailed the other. In November, Rio Tinto was set to close the smelter as rising energy costs put pressure on margins. A consultation process on the closure is in progress and due to continue to the end of February. The recent problems would not affect that schedule. No decision had been taken whether or not efforts would be made to restart the affected pots.
December 12 - China produced 16,015,000 tonnes of primary aluminum in the first 11 months of 2011 up 9.9% from the same period in 2010. Meanwhile output of alumina rose by 15.8% over the same period to reach 31,562,000 tonnes.
Prices;
Aluminum prices finished December at USD 2,020 per tonne down from USD 2,110 the previous month. Concerns that Europe's debt crisis could spiral out of control knocked industrial metals around mid month and 3 months aluminum fell towards USD 1,950 its lowest since July 2010.
Prices regained some of their composure as worries about Europe ebbed and in early January the market made further headway as production cutback news gave sentiment a boost.
(Sourced from Reuters)
