Bank of America Merrill Lynch said during Thursday that the global aluminium market had seen “Notable Improvement” in its fundamental outlook. The BofA said that the improvement in market balance has perhaps been remarkable for aluminium that was set to be falling into deficit in world ex-China after many years of structural surpluses.
The remarkable improvement is due to the production cuts by ex-China with US, Russia and Europe, which resulted in curtailments at many aluminium smelters. But, The Bank also underlined a fact that China was lagging behind other global aluminium producers. They added that switching focused slightly, the Chinese aluminium industry, which had seen some of the most quick production growth in recent years, had stood somewhat apart from developments in world ex-China.
The bank also noted that any output losses could be offset by investing for new, more efficient plant capacity and could keep the better supply in the Chinese aluminium market. Another factor that benefited the market is the warehouse issues on the LME. BofA Merrill Lynch said there would be a gradual improvement as the queues at the warehouse had reduced the incentives for the light metal consumers to tap shares.
It said that the forthcoming changes in the LME rules and regulations had made a subtle change in the market. The other factor is the Indonesian ban on raw material export which also includes bauxite. Bauxite is the primary raw material for making aluminium. But, the bank expects any impact on the global aluminium market would be limited.
BofA Merrill Lynch forecasted an average price of $1,720/mt in Q3, rising to average $1,900/mt in Q4 of 2014.Three-months aluminium was trading at $1886.50 per metric tonnes on LME during Thursday.