When we mentioned December to be a nightmare for Aluminium, we probably should have guessed January would be no better. The nightmares will probably get more frightening in the next few months.
Truly, January has been deadly for Aluminium as continued weakness in consumption across all key markets catalysed a continued decline in spot prices, which fell below $1,300/tonne from $1550/tonne levels.
However many and however deep the cutbacks, the Aluminium market resulted in a surplus because the demand was dropping so rapidly, not much could be done.
Rising LME stocks were proof to the falling demand and stocks were seen rising consistently through the month of January. On the last day of the month of January, Aluminium stocks in LME were a whopping highest for the month at 2,810,825 tonnes. For the year 2009 till date, LME inventories have grown by a net 500,050 tonnes to 2.8 million tonnes.
This follows the 1.409 tonne increase in stocks experienced in 2008. Blame the automobile market Americans have absolutely shunned their cars and car makers by absolutely cutting their purchases of cars.
Reason being, they cannot afford it any more. Plunging car sales have had a serious impact on global aluminium consumption, as the automobile sector accounts for about 30 percent of aluminium end-use.
The car market does not look like it’s on the path of revival in the near future and the only option is to cut production and at current prices producers are definitely feeling the pinch.
The massive LME stock build-up in a short time has made the situation more difficult and the situation does not look good for sometime to come. But production costs have also come down and may be the producers could survive.
Source:Â http://www.commodityonline.com/news/LME-inventories-flooded-with-Aluminium-stocks-15710-3-1.html