Alu­minium to Har­den on Hopes of Oil Out­put Freeze

The Economic Times - - Commodities Plus - Su­tanuka.Ghosal @times­group.com

Kolkata: Alu­minium is likely to get costlier in the com­ing days due to the ex­pected freeze on oil out­put to be clamped by the Or­ga­ni­za­tion of Petroleum Ex­port­ing Coun­tries at its meet­ing with non-OPEC mem­bers on April 17.

The out­put freeze will spur price in­crease be­cause energy ac­counts for about 30% of alu­minium’s pro­duc­tion cost. Alu­minium has been trad­ing above .₹ 97-98 lev­els over the past few weeks as oil prices have been inch­ing higher. A rally in oil prices is likely to push the cost of pro­duc­tion higher for alu­minium prices. “How­ever, the sus­tain­abil­ity of oil prices above $42-43 a bar­rel is still doubt­ful,” said Hi­man­shu Gupta, se­nior mar­ket strate­gist at Karvy Com­modi­ties Broking. “Alu­minium prices are ex­pected to test .₹ 110-111 per kg in the medium term given the weak­ness in the dol­lar in­dex, the pro­duc­tion cuts and sea­sonal de­mand from China in April,” he said.

Ren­isha Chainani, se­nior man­ager-com­mod­ity re­search at Edel­weiss Fi­nan­cial Ser­vices said, “But the ex­pected rally in alu­minium will be short-lived and again it will go back to the lack­lus­tre mood.”

But the re­cov­ery in oil prices not­with­stand­ing, base met­als on the whole have seen a steep de­cline over the past few weeks. The lat­est GFMS sur­vey sug­gests that cop­per mar­ket is ex­pected to re­main in sur­plus by 1,50,000 tonnes. The news that China is ex­pected to ex­port huge stocks of cop­per came as a sen­ti­ment damp­ener.

Alu­minium prices have slipped to .₹ 306 per kg from re­cent highs of .₹ 343 in March. “Prices are likely to slip fur­ther lower to­wards .₹ 290 per kg amid bleak de­mand in power and con­struc­tion sec­tor from China,” Chainani said.

Higher oil prices can lead to higher in­fla­tion and a speedy global re­cov­ery path, cre­at­ing de­mand for in­dus­trial met­als.

The out­put freeze will spur price in­crease be­cause energy ac­counts for about 30% of alu­minium’s pro­duc­tion cost

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