“[Prices] will be high in the next couple of weeks, they will be high in the next couple of months. Next year, they will move to the downside,” he said at the LME Week Seminar on Monday October 31.
For 2017, Harbor is maintaining its aluminium price forecast at $1,550 per tonne, with an upside of $1,650, he said.
The three-month LME aluminium price is currently at $1,724 per tonne, around its highest since July 2015.
“The cost curve is now flatter than before so prices will be closer to [their cash cost level], either to the upside or either to the downside,” Vasquez said.
Looking ahead, global aluminium production growth will rise 30% next year and will double in China. This is taking place with production costs at 13-year lows despite the considerable increase in associated inputs such as coal and alumina. China has shifted considerably and its cost outlook is much more competitive, with 90% of new operations in the country fully integrated.
Globally, producer profit margins are at their highest for five years while in China they are at ten-year highs, Vasquez added.
On the demand side, China’s consumption will continue to grow, albeit more slowly, while rates will be flat in the rest of the world. Given the production outlook, oversupply will remain, with the surplus doubling in 2017. Stocks will remain around record highs of some 16 million tonnes.
This article was first published on www.fastmarkets.com.
Aluminium production will expand considerably over the next twelve to 18 months and, with industry profit margins comfortable, prices will be subdued, Jorge Vasquez of US consultancy Harbor Aluminum said.