Market Briefing - September 4, 2009

On 13th August the aluminium price hit a year-to-date high for LME cash of $2,035/tonne. This was propelled by news that Germany and France had officially exited recession, although it is noteworthy that both economies were still down markedly year-on-year. However, as anticipated in the last Briefing the price has come under pressure since then and declined by approximately $200/tonne.

Supply disruptions remain in the background
As we highlighted in the Base Metals Briefing update this month the issue of potential supply disruptions was also being supportive to the price, given developments in Russia and South Africa, despite the fact that no production has yet been lost. The Russian situation has developed further since our Update, and it now appears likely that it will take 3 years to repair the Sayano-Shushenskaya power plant that previously supplied the 537,000 tonne Sayanogorsk and the 300,000 tonne Khakas smelter. The extent of the impact on aluminium production will depend on whether the Russian authorities and the Siberian power companies can work out a way of compensating for the absence of the power plant during the imminent peak-usage winter months.

Consequently UC RusAl, owner and operator of both smelters, has stated that 500,000 tonnes (or more) of metal could be under threat and cutbacks on some scale do seem likely at these smelters as winter approaches. However, this is unlikely to cause this much aluminium to be lost from UC Rusal’s system (never mind the potential capacity elsewhere that could be restarted). This is because UC RusAl had previously cut production by the same amount across their global network.

> 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.