Nonferrous Department

In his presentation to ISRI Mega Roundtables attendees, Commodity Metals Management Co.’s James Southwood said there are many reasons to be bullish about the future of aluminum pricing.

As an experienced forecaster, though, Southwood also hedged his bets and made sure to mention that there were almost an equal number of reasons to be bearish. Even considering the bearish factors, however, Southwood said he sees LME-pegged aluminum prices rising and told attendees that “scrap spreads should widen” as a result.

He also stressed that charting the changes in the physical aluminum production and consumption picture may be decreasingly helpful in establishing the price of aluminum. Southwood said that in just four years, the number of aluminum transactions on the London Metal Exchange made by investors (with no physical aluminum holdings) increased from 15% in 1995 to 50% today.

This moves aluminum trading into uncharted waters, where speculators potentially have more influence on pricing than they did just five years ago.

That disclaimer notwithstanding, on the positive side, Southwood foresees the U.S. economy continuing on its stable, slow-growth path, and also believes that Japan’s economy can turn around, following in the footsteps of South Korea and Taiwan.