Business | General
Aluminium unlikely to sustain rally fuelled by high energy costs
Record energy costs could drive aluminium prices to fresh all-time highs but some analysts say rising production and stocks and slowing demand mean these lofty levels are unsustainable.
- Reuters
- Published: 00:02 July 7, 2008
London: Record energy costs could drive aluminium prices to fresh all-time highs but some analysts say rising production and stocks and slowing demand mean these lofty levels are unsustainable.
The metal used in power, transport and packaging hit a four-month high of $3,229 a tonne on Thursday, less than $100 from the record high of $3,310 a tonne hit in May 2006.
"The cost of production has been exploding in the last few years, mostly due to the high electricity costs," said Eugen Weinberg, analyst at Commerzbank. "Costs of production will be offer strong support for aluminium prices in the future."
Analysts estimate that up to 45 per cent of aluminium smelting costs - at around $2,600 a tonne - are accounted for by power, prices of which have been rising around the world.
Some analysts doubt whether levels above $3,000 a tonne can be maintained, given rising production in China and other parts of the world.
"Aluminium is actually well supplied," said Per Tingberg, a fund manager at Halbis. "If you actually look at inventory levels, you are not seeing supply tightness, there's plenty of material available."
Analysts estimate Chinese capacity to produce aluminium this year will rise to about 15 million tonnes from 12 million tonnes last year. Global output this year is expected to total 40 million tonnes.
Stocks of aluminium in London Metal Exchange warehouses have more than doubled since November 2005 to above a million tonnes.
Share this article
More from Business General
More from Business
Popular in Business
-
General
Precious jump
Gold prices at new high as India's central bank buys $6.7b worth of gold
Business Editor's choice
-
Sweet life in the Middle East
A sweet look at the confectionary industry in the UAE and Middle East
-
Passion for pets can be expensive
Responsibility and time spent add to costs for furry friends
-
Facebook farm game under cloud
Mobile phone contracts can be used to buy virtual money
