Aluminum Demand Will Advance in Fourth Quarter, JPMorgan Says

LONDON, Oct. 13 -- Aluminum demand is expected to strengthen in the fourth quarter as production "continues to contract," according to Michael Jansen, an analyst at JPMorgan Securities Ltd.

    Aluminum has the highest "beta" connection of all the base metals to industrial production, Jansen said in a presentation at a London Metal Exchange conference in London today. Economic growth in China, the largest buyer of aluminum, will accelerate to 9.9 percent in the fourth quarter from 8.7 percent in the third quarter, according to a Bloomberg survey of 20 economists.

    "The prospect is that China will continue to maintain an above-normal level of imports," Jansen said, according to an e- mailed copy of his presentation. Producers in western countries are "likely to show restraint in bringing excess capacity on line and may shut down permanently high-cost capacity."

    Aluminum inventories in warehouses monitored by the LME have almost doubled this year to about 4.6 million metric tons, according to the exchange. "Significant on-exchange and off- exchange stocks are locked up in finance deals," according to Jansen. "Consumer and producer inventory levels are low."

    (Source: Bloomberg)