Aluminium prices on the London Metal Exchange (LME) will fall in 1998 and 1999 as oversupply swells stocks, according to UK's Economist Intelligence Unit's latest report. The EIU said aluminium production would exceed consumption in the immediate future, leading to an increase in stocks during the remainder of 1998.A "potentially serious oversupply" could develop in the second half of the 1999, which would continue into 2000 despite a strong recovery in consumption, according to the report. It said LME three-month aluminium prices would average $1,425 a tonne in both the third and fourth quarters of 1998, but that the full year average price would be $1,437 a tonne, down 11.3 per cent on the previous year's full-year figure.
The average three-month LME aluminium price would fall a further 3.9 per cent to average $1,381 a tonne in 1999, it added.
Total reported market stocks of aluminium was estimated at 2.81 million tonne in 1998 by the EIU, up on the previous year's figure of 2.26million tonne. The figure is seen rising to 3.62 million in 1999, and 4.64 million in 2000.
The report said stocks would increase sharply because of the restart of idled aluminium capacity and the commissioning of additional capacity at several plants.
Committed changes to preliminary aluminium smelting capacity would add 250,000 tonne a year to Western (Western European and North American) capacity in 1998, the EIU said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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