Photographer: Andrey Rudakov/Bloomberg

Meet the `Miserable' Metal: Aluminum Sinks to `09 Low on Surplus

Updated on
  • Prices heading for eighth straight day of declines in London
  • `The fundamental outlook is weak,' says Guotai analyst Wang

Dwight Anderson had a point when it came to aluminum. The price sank to the lowest level in more than six years on Friday on concern that a global glut will endure, extending a losing run after the hedge fund manager dubbed the metal as miserable.

Three-month futures fell as much as 0.4 percent to $1,484.50 metric ton on the London Metal Exchange, the lowest level since June 2009, and traded at $1,486 at 12:28 p.m. in Singapore. The metal is set for an eighth daily loss.

Aluminum fell 20 percent this year as global supply exceeded demand, with output from top producer China surging even as economic growth slowed, spurring increased exports. Anderson, founder of hedge fund Ospraie Management LLC, described aluminum in an interview this week as “miserable,” probably forcing closures and bankruptcies. BNP Paribas SA expects a surplus of 1 million tons this year.

“The fundamental outlook is weak for the metal with some miserable factors like oversupply not easing in China even as prices keep falling,” Wang Rong, an analyst at Guotai & Junan Futures Co. in Shanghai, said on Friday. Speculation about government subsidies for local producers worsened sentiment in recent days as smelters were seen continuing producing with the policy encouragement, according to Wang.

Rising Supply

Primary aluminum production in China expanded 12 percent in the first nine months of this year while the expansion of the country’s gross domestic product was the weakest since 2009. Shipments of unwrought aluminum and aluminum products from Asia’s top economy surged 18 percent between January and September.

Alcoa Inc., the top U.S. aluminum maker, said last month it will break itself up by separating manufacturing operations from a legacy smelting and refining business that’s struggling to overcome the booming production from China. While the company forecast a global surplus this year, it sees a shift to a deficit in 2016.

A total of 58 percent of traders and executives picked aluminum as their “favorite short” in a survey by Macquarie Group Ltd. at this month’s London Metal Exchange’s annual gathering. It was the only LME metal seen with downside over the coming year, Macquarie said.

“Aluminum is miserable and is going to stay miserable and will have to force closures and bankruptcies,” Anderson told Bloomberg’s Stephanie Ruhle and David Westin. “For most industrial metals, we have a negative outlook for the near term.”

— With assistance by Alfred Cang

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