Production cost may lift aluminium prices

NEW DELHI: Rising energy prices may push up aluminium prices to new heights across the globe.

According to analysts, however, rising production and stocks and slowing demand may not allow the commodity keep the lofty levels for long time.

The metal used in power, transport and packaging hit a four-month high of $3,229 a tonne on Thursday, less than $100 from the record high of $3,310 a tonne hit in May 2006.

Market watchers said the cost of production has been exploding in the last few years, mostly due to the high electricity costs. Costs of production will offer strong support for aluminium prices in the future.

Analysts estimate that up to 45 per cent of aluminium smelting costs — around $2,600 a tonne — are accounted for by power, prices of which have been rising around the world.

Some analysts doubt whether levels above $3,000 a tonne can be maintained, given rising production in China and other parts of the world.

Aluminium is actually well supplied. If one looks at inventory levels, one would not see supply tightness, there’s plenty of material available.

Analysts estimate Chinese capacity to produce aluminium this year will rise to about 15 million tonnes from 12 million tonnes last year. Global output this year is expected to total 40 million tonnes.

Stocks of aluminium in London Metal Exchange warehouses have more than doubled since November 2005 to above a million tonnes.  as reported by commodity online