Sumitomo Corp Forecasts Global Primary Al Oversupply Continues in 2010

Sumitomo Corporation, Japanese major trading house, announced its forecast for global primary aluminium market in 2010, along which global ingot demand is estimated at 39.2 million tonnes, increasing by 10.3% compared with 2009, while global ingot supply at 41.1 million tonnes, increasing by 9.8% from 2009. Oversupply condition would continue for 4 years in a row. Sumitomo Corp. forecasts primary aluminium price at London Metal Exchange (LME) in the range at US$ 1,500-2,350 per tonne for 2010. The current price seems to be the yearly peak and the market price would turn down toward the yearend.

Demand for primary aluminium ingot is expected to recover in all areas of the world in 2010 compared with 2009, in Japan, USA, Western Europe and China. The demand totally declined in 2009 due to the impact of Lehman Brothers’ collapse.

Ingot production is forecasted to decrease in Western Europe and North America in 2010 from 2009 where productive costs are high. Russian ingot makers are likely to continue output reductions in 2010 and the annual production would shrink year-to-year.

On the other hand, large-scale ingot plants are scheduled to start operations in UAE and Qatar this year. Capacity expansions are also planned in Iran and India. As to China, the world largest producer of primary aluminium ingot, smelters are expected to recover from suspensions or output reductions. Chinese supply capacity is estimated at 20 million tonnes ore more.

LME primary aluminium price seems at the excessively high level currently, Sumitomo Corp. analyses, because global funds flow into commodity markets in response to low interest policies by many countries. Sumitomo Corp. forecasts LME price should reflect the actual supply and demand balance and turn downward in 2010.