Aluminium Metals Report Q2 2016
BMI view: We will maintain our aluminium price forecast for 2016 at USD1,575/tonne. Although priceswill bottom in H116, production will outstrip consumption until 2018 and anchor prices. In particular,cheap Chinese exports will keep the market well supplied.
Latest Developments And Structural Trends
We expect prices to average USD1,575/tonne in 2016 and USD1,600/tonne in 2017, climbing to onlyUSD1,750/tonne by the end of our forecast period in 2020. As of February, consensus has moved lower,more or less aligned with ours over the next few years.
Global aluminium production growth will slow due to persistently low prices. We forecast global outputto grow by 3.9% in 2016 compared to 8.5% in 2015.
China will remain the driving force behind global aluminium production, with output growth continuingto outstrip growth in the rest of the world. China's output growth will slow from 16.0% to 8.0% in 2016due to gradual scaling back of capacity.
Production in Europe and the US will be global weak spots as producers continue to make capacity cutsin response to low prices. Weak smelter margins have been exacerbated by the collapse in LMEpremiums over 2015 and we expect premiums to remain depressed.
Due to weak margins in primary aluminium smelting, more firms could follow Alcoa's lead and pivottowards higher-value products such as for the autos and aerospace industries.
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