29 December 2013

The cost of aluminum reached a four-year low

It turns out that the price of aluminum fell by 1%, from now its cost is 1 719-t dollars per ton. The lowest price for this metal falls on July of the post-crisis year 2009 (only $ 1 697-m dollars per ton), when aluminum fell by 19.3% from the first quarter of that year.

Experts explain such an impressive fall in cost by world overproduction of aluminum (on average per ton). However, according to the results of the current year, the surplus is no longer observed. Moreover, the largest aluminum producers Alcoa, Chalco and UC Rusal are planning to cut their initial production volumes, but it is possible that such an action will lead to a deficit and a significant increase in the prices of the metal. According to "Societe Generale SA" in the coming year, the output of aluminum may increase by more than 6%, while the surplus of this metal will be more than 500 thousand tons.

To reduce the volume of aluminum produced, the company - producer of UC Rusal reduced the current capacity, and also closed a certain part of the production. Following the forecasts of this company, in the second half of 2014 the volume of produced capacities will decrease by 15%, which in quantitative terms will amount to 3.5 million tons of aluminum (less than in the crisis year 2009).

Now in London, not aluminum itself is sold, but only its contango (in other words, it is the possibility of its refinancing), which is completely untrue. After all, on the stock exchange metal is offered at one price, and the final consumers are ready to pay for it for 300 dollars more. In short, physical demand exceeds the expectations of speculators and financial players, who deliberately lower prices.

However, no one takes seriously this reduction in production. In all companies there is overproduction, solely for this reason they produce metal with a fairly low cost. Moreover, if all enterprises close only the most expensive production, then this will not affect the level of world prices, and they will still fall.

In turn, representatives of the company "UC Rusal" see a positive trend in the world aluminum market, and do not exclude its balance. So, already in the last quarter of 2013 there is a slight supply deficit, as the demand for aluminum is not provided by real supplies.

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