Market Briefing - May 18, 2009

Looking at the performance of aluminium cash prices over the course of April and in May-to-date could create the illusion that underlying conditions in the market are improving. Continuing the trend that was set in March, prices kept to a broadly rising trajectory throughout the period. On 7th May they peaked at $1,551/tonne, a level only surpassed on two days in early January (when a re-weighting of commodity indices had fuelled a short-lived speculator-driven spike in the price).

The illusion was marred by the continued increase in LME inventories, suggesting the market remains in surplus. In April alone, stocks rose by 315,000 tonnes with a further 94,400 tonne increase having taken place since. This year-to-date, LME inventories have grown by 1.548m tonnes.

The lack of obvious support from its fundamental market suggests prices received a boost from elsewhere. The exceptionally strong imports into China undoubtedly provided part of the explanation. Combined imports of aluminium and aluminium products tripled m-o-m in April, to reach 439,902 tonnes. Continued purchases by Chinese authorities could have fuelled this, as could have a sharper decline in local production. One other factor GFMS Metals Consulting believes drove prices higher in April and May-to-date is speculative demand on the back of interest in the wider base metals sector, largely fuelled by an apparent tightening of the copper market.

> This article gives the introduction to our latest detailed analysis on the market. To access a fulll version of a recent detailed monthly report on the base metals markets plus a recent briefing update, click on the links below.

> Base Metals Market Briefing - December 9, 2008.

> Base Metals Market Briefing Update - December 16, 2008.

Disclaimer: Whilst every effort has been made to ensure the accuracy of the information used in this document, GFMS Metals Consulting cannot guarantee such accuracy and GFMS Metals Consulting does not accept responsibility for any losses or damages arising directly, or indirectly, from the use of this information.