A shinier outlook for aluminium?

published 7 September 2007

Aluminium has fallen behind in the base metals rally of the past few years; this year, prices have slid by about 10% as inventories have risen. But the metal, used in drinks cans, cars and aircraft, should regain its lustre. Supply looks set to tighten as high energy costs production is far more energy-intensive than for other base metals lead to plant closures, as commodities guru Jim Rogers recently pointed out. Demand from China, the world's largest producer, is on the rise as consumers buy "increasing numbers of just about everything from drinks cans to cars", says Eoin Treacy on Fullermoney. Chinese vehicle sales leapt by 23% in the first half of 2007. Xiao Yaqing of the Aluminum Corp. of China reckons Chinese aluminium demand will grow by 33% this year, while global consumption will rise by 10%.

Strong Chinese demand, along with the removal of tax rebates on aluminium exports suggests the country is on course to become a net aluminium importer in the next few years. This is likely to be the case by 2009, says Wang Feihong of Beijing Antaike Information Development Co. "There will be a strong boost to global aluminum prices". In the medium term, then, the outlook for aluminium is "appealing", says Treacy. There is a London-listed aluminium exchange traded fund (ALUM).