Global demand for aluminum is rising again, and one forecaster is convinced that means the LME price for aluminum will rise along with it.
Speaking to attendees of the Aluminum Roundtable at the 2009 ISRI Commodities Roundtable Forum, analyst Javier Vasquez of Harbor Intelligence, Laredo, Texas, offered a series of charts to bolster his forecast that the fundamentals point to an aluminum price rise for the next several months.
Although it may not feel like a bull market in the United States, construction projects and urbanization in other parts of the world are providing the demand boost for commodities such as aluminum, says Vasquez.
Addressing those who wonder whether aluminum’s recent price gains are based on legitimate market fundamentals, Vasquez remarked that “global average daily demand is up 34 percent in August of 2009 vs. January of 2009.”
Vazquez says that, with the “sharp exception” of December 2008, global demand for aluminum has continued to increase “no matter the economic cycle.” From 2002 to 2008, the average annual growth in aluminum demand was 7.3 percent, he noted.
In terms of a forecast, he sees the price of LME aluminum rising to as high as $3,000 per metric ton by May of 2010. That would be a considerable price surge beyond the $1,088 to $1,740 price range for LME aluminum (aluminum alloy, cash settlement pricing) thus far in 2009.
Vazquez also commented that while LME aluminum inventories appear to be considerable, by his estimate some 3 million tons of the 4.7 million tons stored in LME warehouses is already earmarked for company supply chains and is not legitimately available to the wider market.
Two of the panelists at the Roundtable were drawn from the used beverage container (UBC) segment of the aluminum industry. Both John Woehlke of Evermore Recycling and Robert David of Wise Metals Group offered comments on whether more UBCs can be harvested from the American public.
Woehlke, whose recently-formed company has been set up to purchase UBCs for Alcoa and Novelis melting facilities, said the key is “changing consumer behavior” and that “access to incentive programs” may be one way of doing this.
David said that higher aluminum pricing has not made a difference in collection rates and that he fears “we lost a generation” of dedicated recyclers. However, he believes that recycling is “in” again, which could provide an opening for collectors and buyers of UBCs. “We have to take advantage of that by making [recycling] more convenient.”
Woehlke, when asked if he anticipated whether Evermore may run into an anti-trust investigation, said the legal counsel of both companies (Alco and Novelis) examined that possibility. “We never would have created the company [if] we thought there was going to be an anti-trust issue.”
Beyond the UBC sector, Don Kassing of JW Aluminum, Mt. Holly, S.C., remarked that his aluminum products company has diversified into several end markets, but even so was unlikely to keep its average annual production growth rate of 13.7 percent going in 2009.
Kassing remarked that his company has been able to focus on communicating more clearly (and more frequently) with its scrap suppliers during the downturn to increase the quality of the scrap shipments it receives.
The 2009 ISRI Commodities Roundtable Forum was held Sept. 15-17 in Chicago.