SHANGHAI, Nov 03, 2011 (Dow Jones) -- Aluminum prices have the best chances of rising in 2012, among all six base metals traded on the London Metal Exchange, as the metal is "a nation-building material and an emerging middle class material [in auto and consumer-packaging sectors]," Paul Robinson, group manager of nonferrous metals at CRU Group, said Thursday.
There may some short-term price volatility due to economic uncertainty, but prices will likely rise 15% in the next five years due to a potential slowdown in supply, he said during an industry conference.
"We've already started to see a supply response to weakness in the market, such as Hydro turning around and delaying the start of their Sunndal smelter. So the downside is limited by cost support and actual supply slowdown."
Robinson also said he's "less worried" about stocks locked in financing deals at LME warehouses being released to the physical market, given the low-interest rate environment.
"We won't see those stocks being released to the market until interest rates are higher, or until there are more attractive alternatives, and both of those would mean that we get a better economy."
Financing deals were put in place as prices slumped during the downturn and metal was sold or pledged to raise much-needed working capital.
Investors, traders and banks bought inventory at spot prices and sold futures one to two years forward in so-called financing deals.
Total LME stocks are 4.55 million metric tons as of Nov. 2.