Reuters reported that budding signs of stability in the ailing US automotive sector will kick start a quicker demand recovery for aluminum, even as the industrial metal's supply base in US warehouses will continue to swell from the industry's severe downturn.
Further demand deterioration for the lightweight metal is expected during the seasonally slower summer months, as automotive companies change production lines and curtail output during the peak energy consuming period.
Ms Catherine Virga senior base metals analyst with CPM Group in New York said that "With a bottoming out in auto sales and production we could see aluminum demand start to pick up again as early as September or October."
She said that "When we are coming from such low levels of production and sales, any sign of recovery is going to have an effect on the market."
Data on Wednesday continued to show vehicle sales by the big three US automakers General Motors, Ford and Chrysler on the decline in June. Ford, the only US automaker not supported by emergency US government funding, reported a 10.9% drop in sales in June, while GM posted a 33.6% decline and Chrysler came in with a 42% slide.
According to the Aluminum Association, the average US built automobile contains 326 pounds of aluminum or about 8.7% of its weight. Despite the gloomy sales figures from the Big 3 automakers.
According to Autodata, industry wide annual sales were reported at 9.69 million units down from 9.9 million in May. The data offered some glimmering hopes but fell short of marking a turnaround in the US auto market from a punishing 4 year decline.
Mr Mark Pervan senior commodities analyst with AZN said that "The deliveries could well be deferrals by the Big Three automakers and other industry related companies."
If companies are deferring deliveries and running down their own stocks, it could mean a big rise in apparent aluminum demand once vehicle sales pick up although with stocks at almost 4.4 million tonnes inventories seem plentiful even if much of the material is tied up in long term financing deals.
(Sourced from Reuters)
