UNITED KINGDOM October 23 2013 11:06 AM
LONDON (Scrap Register): Deutsche Bank said that they are continue to see aluminium prices drifting lower into the first half of 2014, which will ultimately trigger the final wave of closures before a price support is found.
According to the bank, aluminium contango (both steepness and the shape) remains attractive at most tenors, and although the market remains less willing to take on premium risk, inventory financing is still viable in our view.
Although aluminium prices have increased by 4% since the middle of September, seemingly in line with falling European and US premiums, we remain sceptical of the view that the flat price will compensate for any declines in the physical premia without further production cuts.
The correlation between aluminium prices and physical premiums has been very low over the past two years, although there is a broad correlation of rising premia in the face of falling prices over the past two years.