LONDON, Oct 04, 2011 (Dow Jones) -- Harbor Intelligence Tuesday downgraded its outlook for aluminum prices in 2011 and 2012, saying that prices have fallen out of a medium-term upward trend partly as a result of a "significant spike" in fear over a contraction in global manufacturing and the euro-zone debt crisis.
The aluminum analysis firm cut its average aluminum price forecast for this year to $2,459 a metric ton from $2,514/ton previously and its 2012 forecast to $2,613/ton from $3,100/ton.
"Fear could continue to appreciate the U.S. Dollar and incentive funds to further short aluminum and thus temporarily take prices as low as $2,000/ton in the short-term," it said.
Like other dollar-denominated assets, aluminum prices can struggle when the dollar strengthens, as it makes the metal appear more expensive to other currency holders.
Harbor Intelligence noted, however, aluminum's relative resilience compared with the rest of the base metal complex, precious metals and equities markets, and said global physical demand for the metal has so far remained resilient to rising risk aversion.
"In China, visible inventories continue to free fall, the spot-front month Shanghai Futures Exchange backwardation has increased to over $75 per metric ton and spot aluminum prices trade at a $140 per metric ton premium versus the LME even after VAT considerations," it said.
LME three-month aluminum traded down 0.3% on the day at $2,197/ton at 1456 GMT. In September, the price of aluminum fell 12.6%, compared with a 24.3% drop in the value of flagship copper.