UNITED KINGDOM October 15 2014 10:45 AM
LONDON (Scrap Register): Natixis' bullish view on LME aluminium prices is tempered somewhat by the likelihood that premiums will stay higher for longer.
After averaging something in the region of $1,860 a ton in 2014, Natixis would expect LME aluminium prices to rise to an average of $2,070 a ton in 2015 and subsequently $2,240 a ton in 2016.
According to Natixis, aided by cutbacks in output by western producers as well as Chinese smelters, the aluminium market looks set to experience its first annual deficit for eight years. This has supported an improvement in aluminium prices, although this gain has been split between modestly higher LME prices and a further escalation in aluminium premiums.
In the very near term, there is a risk that higher Chinese output of aluminium, accompanied by higher exports of aluminium products, could lead to near-term weakness in aluminium prices.
However, over the period 2015-16 Natixis would expect the shift towards deficit to become more firmly entrenched within the aluminium market, supported by robust demand growth and constrained supply, as Indonesia’s ban on exports of unprocessed raw materials and China’s efforts to curtail overcapacity are both expected to exert a growing influence over the coming two years.
As a result, aluminium prices are expected to push higher over Natixis' forecast horizon.