Analysts said that even though aluminum stocks at the London Metal Exchange (LME) reached record highs, aluminum prices could still climb as much as 14% in 2011, due to rising energy costs and strong demand for aluminum trading.
As the chart shows, aluminum prices followed the rise in crude oil prices in 2011, because energy costs accounted for 30-40% of aluminum production costs. According to the data from the German Commercial Bank, even though London aluminum stocks increased to a record high of 4.71 million tons on May 18th, rising energy prices and locked-in stockpiles of ** trading will support aluminum prices this year.
“As long as the oil price exceeds 100 US dollars per barrel, aluminum prices will remain high,†said Eugen Weinberg, head of commodities research at Commerzbank, “The crude oil price suggests 'buy', and the London Metal Exchange (LME) inventory indicates 'sell'. 'Usually, a record high for LME stocks will keep prices down, but investors are ignoring this effect because aluminum is not immediately available on the market.'
On May 2, the price of crude oil rose to US$114.83 per barrel. On the following day, the London Metal Exchange’s aluminum price hit US$2803 per ton, the highest level since 2008. According to the median forecast of 25 analysts surveyed by Bloomberg News, aluminum prices may remain above $2,360 per ton this year, and may rise to as high as $2,850.
According to the data of Societe Generale (14.98, 0.13, 0.88%), about 70% of aluminum stocks tracked by LME are locked in by ** transactions, and most buyers cannot buy them from the market. ** Trading investors sell aluminum forward contracts while buying lower-priced shorter-term contracts. If the spread is higher than the stock and the finished product, it is possible to make a profit.
As the chart shows, aluminum prices followed the rise in crude oil prices in 2011, because energy costs accounted for 30-40% of aluminum production costs. According to the data from the German Commercial Bank, even though London aluminum stocks increased to a record high of 4.71 million tons on May 18th, rising energy prices and locked-in stockpiles of ** trading will support aluminum prices this year.
“As long as the oil price exceeds 100 US dollars per barrel, aluminum prices will remain high,†said Eugen Weinberg, head of commodities research at Commerzbank, “The crude oil price suggests 'buy', and the London Metal Exchange (LME) inventory indicates 'sell'. 'Usually, a record high for LME stocks will keep prices down, but investors are ignoring this effect because aluminum is not immediately available on the market.'
On May 2, the price of crude oil rose to US$114.83 per barrel. On the following day, the London Metal Exchange’s aluminum price hit US$2803 per ton, the highest level since 2008. According to the median forecast of 25 analysts surveyed by Bloomberg News, aluminum prices may remain above $2,360 per ton this year, and may rise to as high as $2,850.
According to the data of Societe Generale (14.98, 0.13, 0.88%), about 70% of aluminum stocks tracked by LME are locked in by ** transactions, and most buyers cannot buy them from the market. ** Trading investors sell aluminum forward contracts while buying lower-priced shorter-term contracts. If the spread is higher than the stock and the finished product, it is possible to make a profit.
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