Japan Trade House Expects World Aluminium Oversupply in 2007

Mitsubishi Shoji Light Metal Sales Corporation, Japanese trading house of light metals, forecasts world primary aluminium supply would become surplus against world demand by 290,000 tonnes in 2007. The supply would become surplus for the first time since 2005 due to production expansion in China, Russia, USA, Middle and Near East. In 2008 the oversupply is expected to become clearer. The trading house estimates primary aluminium price at London Metal Exchange would fluctuate around the core range at US$ 2,550-2,850 per tonne and around the wider range at US$ 2,400-2,950 for 3-month future price from 2007 to June 2008.The trading house forecasts world primary aluminium demand at 38.044 million tonnes in 2007, up by 11% from 2006, while the supply at 38.334 million tonnes, up by 12.8%. Both of the supply and demand increase further than originally expected in China, the world largest aluminium supplier and consumer. Chinese aluminium supply is estimated to exceed 10 million tonnes for the first time and approach 12 million tonnes in 2007. Primary aluminium supply seems to increase in all countries and areas other than Africa in 2007.LME aluminium price will fluctuate with such factors as US economic trend, the housing starts and the automobile sales, and the spread of Chinese cheap aluminium products. Speculative funds would continue to flow into commodity markets and sustain the market prices. Primary aluminium price seems to surge up to reflect productive cost expansion such for higher crude oil price. Another factor is Chinese tariff control.