Aluminium price hike on the anvil

METAL PRICES GOING THROUGH THE ROOF

Domestic aluminium producers are likely to raise prices next month following rising overseas prices, industry sources said. The expected rise, however, is likely to be lower than international prices as there has not been a significant increase in domestic demand, they added.

"The rise, the fourth consecutive one, would be about Rs 1,500-2,000 per tonne," said a senior industry official.

This month too, domestic aluminium producers National Aluminium Co and Hindalco had increased prices of all products by Rs 2,300-3,200 a tonne. Domestic producers assess prices at the end of each month for parity with the prevailing overseas prices and are likely to revise prices.

Overseas spot aluminium prices rose to a 9 year high, tracking increased buying by investment funds and strong copper prices, despite a rise in aluminium stocks on the London Metal Exchange (LME).

"There has been a tremendous inflow of investment, and the funds are looking to keep the prices up there through year-end when they (the Aluminium producers) report results," said a Sucden daily note.

"With copper seeing good support from funds, aluminium prices will also move upwards," said Nitesh Jain, a Mumbai-based base metals trader.

He says, copper wire manufacturers will turn to aluminium and even zinc, for a possible substitute to the red metal, if the latter continues to head north. But there is a section of the market that reckons that copper prices will rise further to touch $4,500-5,000 a tonne level in two months and will pull aluminium prices down to $2,500 a tonne level.

Another segment of the market however, begs to differ and feels prices have already moved too high. Also any more upward movement is not justified as the demand is not coming from the physical market, said a senior analyst. Going by trends, LME stocks of aluminium would have risen to about 6,20,000 tonne in the next week, from about 5,00,000 tonne last week.

On Thursday, three-months delivery contract on the LME hit a 9-year high of $2,095 a tonne, closing at $2,085, up from Wednesday's $2,060 close with news that US aluminium major Alcoa Inc will have to cut output this year.

"Alcoa, the world's biggest producer, has cut output at its 195,000 tonnes-a-year Eastalco smelter in Maryland because of worries about power costs. The smelter has been producing at a reduced rate of just 10,000 tonnes a month and the cut in production had been expected, a move which should keep Aluminium heading higher," the Sucden note added.

Aluminium is used for various sectors including automobile, infrastructure, construction and packaging.