From Platts:
Uncertainty in global aluminium market, limited price upside: BNP Paribas
There is a large amount of uncertainty in the global aluminium market with limited upside for prices, BNP Paribas metals analyst Stephen Briggs said Thursday.FT Alphaville's Izabella Kmainska was the first participant or commentator that we heard raise the counter-intuitive possibility that the initial/anticipatory move would be higher prices:
Briggs said that the market is in a large structural surplus and that it is unlikely to move back into balance in the near-term.
"The market will remain in large structural surplus unless the Indonesia-China production chain breaks down, and it is hard to see cutbacks being sufficient to significantly erode excess stocks," Briggs said.
Briggs notes that there has already been a significant number of production cuts and closures this year outside of China, notably by producers such as Alcoa, Ormet, Rio Tinto and Rusal....MORE
..."We expect the LME's proposal to address warehouse queues to lead to further falls in physical premiums, although they may take some years to return to historically normal levels," Briggs said.
However, Briggs notes that there could be unintended consequences as a result of the proposal.
He said that there could be a rush to exit by warehouse stock financiers, and that this could potentially flood the market and cause abrupt falls in both price and premiums.
On the other hand, queues at other LME warehouses could build, or players might struggle to warrant metal, causing some temporary tightness....
The Future Price Trajectory of Copper and Aluminum and the Implications for Oil
Her story was posted on August 8. The implication I took from it was:
...The price action to look for is: first up (although some of that has already occurred), and then, a picture even a four-year-old can understand...
