Market View by Lloyd O’Carroll, Davenport & Company
The slide in aluminium prices continued last week. The LME cash price is closing in on $2000/t which would be the lowest price since July 2010. The decline was justified in our view given a litany of negative news and economic data.

The week began with the rumblings, which were later confirmed, that US congressional super-committee failed to reach an agreement on budget cuts.

Although there is no immediate impact, it was a reminder to the market that the Beltway remains gridlocked on how to lower the ballooning US debt.

Later in the week, economic data showed that manufacturing in both the euro zone and in China contracted in the past month, according to purchasing managers surveys.

In the US, durable goods orders were down. While evidence suggests aluminum demand is soft, the supply side is already reacting to low prices. Global aluminum production was down a sharp 3.6% in October versus September. This amounted to an annualized cut of 1.6Mt, all of which came from China.

Industry Activity

The Aluminum Association estimates that aluminium demand in the United States and Canada (shipments by domestic producers plus imports) totalled an estimated 16,057 million pounds during nine months of 2011, 5.9% above the same period of 2010.

Shipments of aluminium extruded products by domestic producers totalled an estimated 255.9 million pounds during October 2011, an increase of 8.3% over a year ago.
Producer shipments of aluminium drawing stock, bare wire and rod & bar totalled 101.3 million pounds during October 2011, increasing 3.3% over last year.

Economic Indicators and Drivers

US real GDP increased at an annual rate of 2.0% in the third quarter of 2011 according to the latest estimate released by the Bureau of Economic Analysis.