Aluminium glut to continue as smelters get lifeline of lower costs

Tue Jun 23, 2015 8:59am EDT
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* Overproduction has helped depress prices by 28 pct

* Smelting costs have dropped by $400/T - analyst

* Firms face difficult decisions on cutbacks

* China aluminium output graphic:

By Eric Onstad

LONDON, June 23 (Reuters) - The aluminium market is unlikely to see enough producer cutbacks to reduce oversupply in coming months as currency benefits and cheaper inputs have allowed most smelters to stay out of the red.

That means the price of the lightweight metal used in transport and packaging may be drawn still lower towards levels that would force more supply to be shut down, analysts and industry sources said.

Closures or lower output are needed to slash a surplus on global markets mainly due to surging output and exports from top producer China. Consultancy CRU has increased its forecast of a global aluminium surplus for 2015 to 963,000 tonnes.

"Cutbacks are going to be difficult. Input costs have come down, so margins at producers may in fact have stayed OK even though prices have come down," said Robin Bhar, head of metals research at Societe Generale in London.   Continued...