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REUTERS
London, July 25: Aluminium consumption is poised to rise strongly following economic recovery and this is likely from late-1999 on, industry analysts Anthony Bird and Associates said.
The aluminium market was now driven by fear of world recession, which was very unlikely, although growth was bound to be sluggish this year and in early 1999.
But present economic uncertainties were unlikely to produce any market consumption decline as there had been little or no build-up in consumer stocks just before the crisis, analyst Tony Bird said in the company's latest quarterly analysis.
"Indeed, aluminium's short-term competitive position is excellent. This means that when recovery finally arrives, aluminium demand should rise strongly. We expect this to happen from late-1999 onwards," it said.
Aluminium consumption was very steady in the first half this year, although a decline was expected in the second half, "leaving the annual total little changed from 1997."
On supply, it expected a metal surplus in London, July 25: Aluminium consumption is poised to rise strongly following economic recovery and this is likely from late-1999 on, industry analysts Anthony Bird and Associates said.
The aluminium market was now driven by fear of world recession, which was very unlikely, although growth was bound to be sluggish this year and in early 1999.
But present economic uncertainties were unlikely to produce any market consumption decline as there had been little or no build-up in consumer stocks just before the crisis, analyst Tony Bird said in the company's latest quarterly analysis.
"Indeed, aluminium's short-term competitive position is excellent. This means that when recovery finally arrives, aluminium demand should rise strongly. We expect this to happen from late-1999 onwards," it said.
Aluminium consumption was very steady in the first half this year, although a decline was expected in the second half, "leaving the annual total little changed from 1997."
On supply, it expected a metal surplus in1998 and 1999, adding, "There could be an extra 5,00,000 tonne of hidden stocks." "That said, IPAI and market stocks need to be at least 10 per cent of annual consumption to avoid any disruption to the supply system;so even by end-1999 there will be relatively little metal in supplier stockpiles that is truly surplus to requirements."
The report said aluminium companies had been reluctant to make firm commitments to build new smelters as current metal prices made such projects seems uneconomic. "Thus we expect a new supply-demand deficit in 2000. In 2001 the deficit will become much heavier, and the market will start to become tight," it said. Despite falling production costs, at today's metal prices 3.5 million tonnes of existing smelter capacity was losing money and new projects, needing a delivered price of $1,513-$1,704 per tonne to be viable, could not be justified. "This means that is a world recession doesn't come, the aluminium price can hardly stay where it is," the report said.
By late 1999 therecovery should work its way through to aluminium demand and prices would rebound, slowly at first but then gathering speed in tighter market conditions in 2000 and 2001, it said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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