World aluminum prices remain inflated

By Tom Stundza -- Purchasing, 4/16/2008 11:48:00 AM

World aluminum prices continue to be inflated by the high cost of electricity that has boosted smelting costs worldwide, but demand is soft and stocks now exceed a million metric tons (actually 1,029,275 on April 15). So, analysts such as William Adams at Basemetals.com don’t see London Metal Exchange (LME) pricing much higher than the current $1.35/lb “unless there are further supply disruptions.” However, $1.44 is being forecast for summer sales by Alexander Bulygin, the CEO of Russia's United Co. Rusal, which has become a major supplier to world markets.

He says he expects aluminum prices to rise to even higher record levels as world primary aluminum consumption will grow by an estimated 9.6% this year. "Growth will be driven by a combination of increased demand for metals in China and the delay in launching new projects by global majors worldwide due to the lack of raw materials and electricity,” he tells the Dow Jones Metals Report subscription newsletter, “as well as the increasing costs of production because of the weak U.S. dollar and high energy prices.”

Looking ahead, it appears that even short-term weak demand won’t stop global expansion. Saudi Arabian Mining (Ma’aden) is planning a joint venture with Rio Tinto Alcan of Canada to develop a multi-billion-dollar integrated aluminum project. Abdallah Dabbagh, M’aaden president, tells reporters at an industry event in Dubai that the $7.7 billion aluminum project, located at the Persian Gulf coast, will include bauxite mining, alumina refining, power generation and aluminum smelting. Production is due to begin in 2012, according to the Ma’aden web site.