The aluminium market is oversupplied despite many people forecasting a deficit, consultancy Harbor Aluminum's managing director Jorge Vazquez told delegates at the London Metal Exchange (LME) metals seminar in London today.
"Many hold the view that the western world is in a significant aluminium deficit, but we see a surplus," Vazquez said, pointing to LME prices that have fallen by around 40pc since April last year; premiums that have fallen by a similar amount in the same timeframe; on and off-warrant inventories that have grown by around 500,000t in the last year; spreads on the forward pricing curve that recently widened to their highest since 2013; and to the exchange's aluminium open interest figure rising by 10pc year on year.
"Aluminium availability is rising, and the share prices of the big aluminium companies are falling," he added.
Vazquez expects the world to see its biggest ever expansion in primary aluminium capacity in the next two years, due to expansions among producers in the Middle East, India, China, southeast Asia, Russia and the US, while restarts could occur in Brazil and across Europe.
"We don't expect aluminium demand to rise significantly over the next two years, so we expect the biggest surplus the industry has seen in a decade," he said.
Manufacturing growth is expected to bottom out before picking up going into the second half of next year, and then slowing again later in 2020, Vazquez said.
"Prices will bottom between now and February, then we'll see a weak rally before falling again in the second half," Vazquez said, adding that he expects three-month aluminium prices to average $1,720/t in 2020, similar to current prices.
