Market and product
Copper-Aluminium ratio indicates impending uptrend in Aluminium
LONDON/MUMBAI (Commodity Online): After hitting a high of $2803 on 3rd May 2011 at the London Metal Exchange (LME) , the price of Aluminium has corrected by nearly 12% and this correction provides a good opportunity for the bulls. Decreasing supplies and an ever increasing demand also add to the positive bias for the metal.
Why Aluminium is looking positive:
--Tightening supplies – China, which produces 40% of world aluminium production, is estimated to close 22 aluminium smelters with 619,000 tonne of capacity by end-2011.--Increasing demand in major countries - World demand for aluminium will double in the next decade driven by growing use in aircraft, transportation and luxury cars. Mr Gerhard Falch, CEO of Austrian aluminium group said.
--Strong performance of base metals, rising output cost and substitution effect have also made the metal very attractive for investment.
And even when investment in the metal looks promising, the brokerage also flagged concerns that sharp deterioration in global macro situation owning to European debt crisis, slowdown in US economy and run-up in Crude Oil could adversely affect the fundamental picture.Base metals have outperformed equities in general due to negative market sentiments on the euro zone debt crisis and China tightening its monetary policyThe MSCI global equities index reached a temporary peak of 1397.57 on May 2 this year. The index closed at 1313.17 on July 15, which translates into a correction of 6.03% in the said period. In the same period, the LME Index corrected only 1.34%.
Copper to Aluminium ratio:
Copper is now nearly four times as expensive as aluminium, the highest such ratio on record.
The Copper and aluminium ratio has rebounded to near record levels and given our expectation of rising copper prices this should be supportive of aluminum. said Mr Ivan Szpakowski analyst at Credit suisse
“Aluminum is set to play catch up and redress the imbalance,” says Nick Moore, head of commodity strategy at RBS.
India’s Sharekhan Ltd, a leading brokerage, has initiated a 'BUY' call at $2,466 as per a report.
At the Multi-Commodity Exchange of India (MCX), Aluminium had hit a high of 125.10 on 4th May, 2011, from which it has fallen to 113.75 on July 23.
