In the past few weeks, the global marketplace has been met with some much welcomed positive news. However, on the back of a massive slide in commodities prices, aluminum companies are still struggling with record low prices and seemingly nonexistent demand.
Aluminum producer’s cutbacks have done little to stabilize the metal’s free fall. In London, the price of aluminum fell to $1,321 per tonne from $1,345. In New York, it was selling for 59 cents per pound. Six months ago, the metal’s going rate was $1.50 per pound.
Aluminum prices are near five-year lows as orders drop from automakers, builders and appliance manufacturers. The global recession, collapsing consumer and corporate confidence and plunging demand for industrial metals have combined to drop the aluminum prices on the LME to their lowest monthly rate since April 2003.
World aluminum prices recorded a marginal gain on Monday on the back of news that the incoming US administration will be unveiling a major stimulus package. US President-Elect Barrack Obama announced plans for the biggest infrastructure investment since the creation of an interstate highway in the 1950’s.
If there was anyone who had reason to celebrate the failed BHP takeover of Rio Tinto, it would be China, and more specifically Chinese smelters. Last February, Aluminum Corp. of China together with Alcoa, paid $14.1billion for a 12% stake in Rio-Tinto’s London listed shares. Conspiracy theorists said the move was engineered by Beijing.
The precipitous drop in commodity prices is putting companies under pressure, particularly feeling the squeeze are oil and metal mining companies. To be optimistic we must note that even though the current conditions are dire, the seeds are being sowed for another big rally in the metals.
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