Despite higher inventory level of aluminium at the London Metal Exchange (LME), prices of aluminium are set to rise to $2,400-$2,500 a tonne by March 2011 on the back of good demand from various sectors like aviation, transportation, electronics among others.
Presently, LME aluminium is hovering around $2,250 a tonne after a correction of around $150 a tonne from mid-October this year.
“Though there was some fall in the price of the metal in the recent past, another round of correction is less expected. We hope a price range of $2,400-$2,500 a tonne by the end of this financial year on the back of sound demand from sectors like aviation, transportation and electronics among others,” Mukesh Kumar, chief operating officer of Vedanta Aluminium said.
Higher inventory level of around 4.2 million tonnes will not put pressure on the pricing front as most of the stock was tied up for future delivery, he added.
About current demand scenario, Kumar said the world aluminium consumption would reach 41 million tonnes, up 10 per cent from 37 million tonnes last year on rising demand from developing nations like China, India, Brazil among others.
Aluminium is an under performer in the metal bourses in the recent past in comparison to other base metals like copper and nickel.
According to industry experts, factors like less encouraging job data from the US, spreading debt crisis in European countries, monetary tightening by Chinese central bank along with the recent Korean crisis had an impact on the commodity market as a whole, dragging base metals in the international bourses.
“Though concerns relating to overall economic environment in the US and Europe persists, it will not have major impact on the pricing front,” Kumar said.
Some other aluminium manufacturers in the country echo a less bullish sentiment.
“Predicting a price trend is really difficult because of the frequent volatility at LME. However, prices are expected to be in the range of $2,000-$2,500 a tonne by end of this financial year,” a top company official of National Aluminium Company (Nalco) said.
He, however, said prices were less expected to go below $2,000 a tonne. Referring to this matter, an analyst with Karvy Comtrade said aluminium prices would see an increase from present level due to intrinsic demand-supply environment in the global market. While the demand from China is still robust despite monetary tightening measures, debt crisis in some of the European nations don’t have much of adverse impact on this commodity, he added. He, however, said that a strong dollar might hurt the future prospects of the metal.
About the price movement of the metal at LME, he said there might be a little correction in aluminium prices in the near-term after which it was expected to touch the level of $2,500 a tonne by end of this financial year. He also said a marginal increase in inventory level in the last few days at the LME indicated a sound demand scenario in the market place.
