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Informist, Wednesday, Nov. 27, 2024

 

By Ashutosh Pati

 

MUMBAI – After gaining 14% so far in 2024, aluminium prices on the Multi Commodity Exchange of India and the London Metal Exchange are likely to rise 5-6% more by the end of the year on persistent concerns about supply of raw materials and China’s decision to end its export tax rebate on aluminium, analysts said. In the longer term, experts believe the global transition to green technology will support demand for the metal, which will aid prices.

 

BMI, a unit of Fitch Solutions, revised its 2024 aluminium price forecast to $2,450 per tonne from $2,400 per tonne owing to a combination of more robust individual market dynamics and broader market fundamentals.

 

Ajay Kedia, director at Kedia Advisory, sees aluminium prices in the range of $2,750-2,780 per tonne on the LME in the short term. Prices on the MCX could reach INR 260 per kg, he said. At the time of writing, the most traded December aluminium contract on the MCX was up 0.5% at INR 243.15 per kg and the three-month aluminium contract on the LME was at $2,619 per tonne, up 0.3%.

 

"The China move has sparked concerns about tightening global supplies, with more output likely to stay within China," Ventura Securities said in a report. China’s finance ministry announced it would cancel the export tax rebate on aluminium products from Dec. 1, signalling strong domestic demand. China accounts for nearly 60% of global production of aluminium and the output in the country rose by 120,000 tonnes to 3.72 million tonnes in October. This move will make Chinese aluminium expensive in the international market, leading to a fall in export volumes, it said.

 

"This (cancellation of the export tax rebate) could be a strategic power move, demonstrating China's crucial role in global markets and its ability to influence prices and demand, in the context of trade tensions following Donald Trump's win in the US presidential election--which China might use as leverage in trade negotiations," ING Economics said in a report.

 

Further, Russia's Rusal, among the world’s larger aluminium producers, will cut output by 250,000 tonnes per annum in the first stage of its production optimisation programme. The decision to cut production comes as the result of record-high alumina prices, which have exceeded $700 per tonne. “RUSAL has to purchase more than a third of the required alumina overseas at market prices, which puts significant pressure on its production marginality,” the company said in a release.

 

Also, aluminium stocks at warehouses monitored by the Shanghai Futures Exchange are at their lowest level since June at 231,854 tonnes. Data from the exchange showed that inventories fell for a fourth consecutive week Friday.

 

"We are expecting LME prices could test $2,800 per tonne by the end of the year," said Manoj Jain, director of Prithvi Finmart. On the domestic exchange, Jain expects the December contract to hover around INR 260-265 per kg.

 

"In the short term, aluminium remains a buy-on-dips opportunity, with 241-240 serving as a favourable buying zone. However, if prices fall below 237-236, a further bearish trend could emerge," Ventura Securities said in its report. The broking firm is bullish on the metal in the short term and expects resistance at INR 260-270 per kg.

 

However, the dollar has strengthened since Trump’s win, which could be a downside for prices. Trump has vowed to hit China, Mexico, and Canada with new tariffs on day one of his presidency. “Base metals have been under pressure since Trump's presidential win due to the potential trade war and weak demand outlook in China,” ING Economics said in a report.

 

GREEN TECH

Analysts believe rising demand from the global clean energy transition is likely to support aluminium prices. The metal plays a significant role in the global clean energy transition as it is used extensively in renewable energy equipment like solar panels, wind turbines, and electric vehicles.

 

"Our long-term outlook is positive, as we see steady demand growth over our forecast period, driven by the growing application in industries such as autos, construction, renewables and packaging amid the acceleration of the green energy transition," BMI said in a report.

 

BMI expects global aluminium consumption to rise to 88.2 million tonnes by 2033 from 70.5 million tonnes in 2024 as rising concerns over supply in the longer term could drive growth and major economies will introduce measures to boost aluminium production.  End

 

US$1 = INR 84.45

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Rajeev Pai

 

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