Aluminium market facing 1.1 million mt deficit in 2014: Barclays

The aluminium market is facing a supply deficit of 1.1 million mt in 2014, up from a deficit last year of 726,000 mt, Barclays said Monday.

 

"The trend in the aluminium market remains one of tightening in current and prospective supply-demand fundamentals, the investment bank said in its latest Metals Magnifier report.

 

The 1.1 million mt deficit forecast for 2014 is divided between a 250,000 mt surplus in China and 1.3 million mt deficit in the rest of the world.

 

"We also project a 1.1 million mt deficit in 2015 and believe that the prospective two years of substantive ex-China stock draws will tighten fundamentals enough to catalyse a rebound in prices and support some sustained pressure on time spreads," Barclays said.

 

In 2013, global consumption rose by 7.9% from 2012 to 50.357 million mt, outstripping a 4.5% rise in output to 49.631 million mt, the report said.

 

Chinese production stood at 22.972 million mt, marginally below domestic demand of 23.022 million mt.

 

The key development on a sequential fundamental basis has been the overwhelming upside surprise in demand strength, the report said, citing data showing October/November primary demand rising 13% year on year, compared with average 7% year-on-year growth for the first three quarters of 2013.

 

"This ties in with the improvement in global manufacturing confidence during the period. In the context of the year-on-year contraction in ex-China output, this supported the deficit development," Barclays said.

 

Barclays is forecasting an average London Metal Exchange cash price of $1,850/mt for 2014 -- in line with $1,847/mt in 2013 -- rising on a quarterly basis from $1,750/mt in Q1 to $1,850/mt in Q2/Q3 and $1,950/mt in Q4.

 

The LME cash settlement price on Friday was $1,716/mt.