Aluminum Prices May Climb to Six-Month High This Quarter
Aluminum prices may rise to as much as a six-month high by the end of the quarter as processing companies replenish inventory to meet a rebound in demand, said Vedanta Resources Plc (VED), India’s biggest producer.
Prices may climb to as much as $2,300 a metric ton on the London Metal Exchange by March 31, Mukesh Kumar, chief operating officer of the London-based company’s Indian unit, said in an interview. Aluminum, used to make autos and aircraft, ended yesterday at $2,164 and last closed above $2,300 on Sept. 21.
A rise in manufacturing indexes in China and India may spur sales of cars and consumer appliances, leading to higher demand for aluminum. Prices may be boosted by a global supply shortage in the first half as smelters idle as much as 15 percent of capacity following the sovereign-debt crisis in Europe and China’s measures to control inflation.
“Soon the processing companies will start buying and this will support prices,” Kumar said by phone yesterday. “Demand in India is likely to surge this quarter, as contractors of government projects race to meet deadlines for the fiscal year.”
Hindalco Industries Ltd. (HNDL), India’s second-largest aluminum producer, and Sterlite Industries (India) Ltd., a unit of Vedanta Resources that owns Bharat Aluminium Co., rose to their highest in four weeks.
Hindalco gained as much as 5.2 percent to 129.50 rupees and traded at 129 rupees as of 12:19 p.m. in Mumbai, while Sterlite climbed as much as 4.2 percent to 99.90 rupees and traded at 99.55 rupees. National Aluminium Co., the nation’s largest state-owned producer, rose as much as 2.1 percent to 57.85 rupees, the highest in almost two months, and traded at 57.30 rupees.
India’s government plans to double its spending on public works and utility projects to $1 trillion in the five years ending March 2017, aiming to achieve economic growth of 9 percent. The economy will expand about 7 percent in the year ending March 31, Prime Minister Manmohan Singh said on Jan. 8, less than his December prediction of 7.5 percent.
The billionaire Anil Agarwal-controlled Vedanta group, comprising Vedanta Aluminium Ltd. and Sterlite, produced more than 637,000 tons of aluminum in the year ended March 31, about 40 percent of India’s total output. Unprofitable Vedanta Aluminium, which is coping with rising costs of alumina and power at its annual 500,000 ton smelter in eastern India, plans to maintain production, anticipating a revival in prices this quarter, Kumar said.
Bauxite is turned into alumina that is in turn refined into aluminum. About four tons of the mineral is used to produce a ton of metal.
Manufacturing from the U.K. to India improved in December, suggesting production is weathering strains from Europe’s debt crisis. Purchasing manager indexes for the U.K., Switzerland, China, India and Australia rose last month, while German unemployment fell more than expected as exports of cars and machinery boomed. U.S. manufacturing growth accelerated more than economists forecast to the fastest pace in six months.
Aluminum prices are expected to rise this year and next, Lloyd O’Carroll, an analyst at Davenport & Co., told Bloomberg Television on Jan. 9. More than 40 percent of global capacity is running at a loss and output cuts are likely to continue, lifting prices, he said.
“The price outlook is bullish as recent data show a revival in manufacturing activities in China and India and expectations of better buying in the U.S.” said Ravi Bhushan, a base-metals trader on the Multi Commodity Exchange in Mumbai. “Prices have started to look up in the New Year and the trend should continue.”