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Aluminum stockpiles have risen consistently this year amid the downturn in the auto sector; however recent evidence that the economy is improving combined with confidence in Chinese purchases have lifted aluminum demand.
By Leia Michele Toovey- Exclusive to Aluminum Investing News
Aluminum demand in Japan has improved as carmakers and machinery producers increased output after reducing inventories. Aluminum stockpiles in Japan dropped by 15 per cent in June from a month earlier to the lowest level since July last year. Inventories in Yokohama, Nagoya and Osaka ports fell to 207,600 metric tonnes at the end of last month compared with 243,300 tonens on May 31 and 202,800 tonnes a year earlier.
After hitting the bottom in the first quarter, domestic demand has been gradually improving. The country’s $269 billion in stimulus spending helped consumer sentiment climb to an 18-month high in June. Stockpiles also fell as trading companies and aluminum rolling mills pared purchase volumes under supply contracts this year. The government yesterday said the economy is “picking up” and upgraded its view of exports, business sentiment and consumer spending, which accounts for more than half of the country’s economy.
Despite the rosy report out of Japan, analysts warn fundamentals remain poor. “Chinese demand for aluminum remains robust however, some of the recent strength can be explained by government purchases and a restocking effect,” Standard Bank said in a note. The Chinese government has now officially ended its non-ferrous metals stockpiling, so demand will moderate in the coming months and imports will normalize. On the LME, stocks of aluminum continued to rise hitting a record high above 4.4 million tonnes. Aluminum MAL3 closed at $1,561 a tonne from $1,572 at the close on Friday, after data showed stocks of the metal used in transport and packaging surged 43,125 tonnes overnight. Secondary aluminum prices in Europe rose at the end of last week as the recent pickup in demand shortened supply.
Company News
Alcoa Inc., the largest U.S. aluminum producer, said Wednesday it lost $454 million during the second quarter, as the global recession continued to dampen demand and prices for the lightweight metal. It was Alcoa’s third straight quarterly loss.
BHP Billiton LTD, Africa’s biggest aluminum producer, will stop output of some products at its Bayside smelter in South Africa at the end of September as demand weakens. “Bayside has experienced a sharp decline in domestic demand,” spokeswoman Bronwyn Wilkinson said “. The smelter will stop so-called casting rod and billet, and keep supplying slab metal,” she added.
Venezuela’s state aluminum smelters have continued to operate normally despite the start of a strike by workers demanding the government address industry problems they blame on outmoded equipment and insufficient investment. Spokesmen for the Alcasa and Venalum smelters said some workers had stayed away, but there was enough staff to maintain production. Venezuela’s government promised months ago to launch a plan to revive the aluminum industry, but has not yet done so. Industry officials have estimated it will take more than $1 billion to pay debt and invest in adequate new technology.