In 2010, long term financing deals will remain attractive for both traders and producers and in particular, some institutions will seek opportunities to increase their exposure to such deals (financing deals), depending on the shape of the forward curve, and providing that interest rates remain at current low levels. This is expected to continue support the price in 2010 (especially in the first two quarters), since it will keep metal away from the market.
A rise in aluminium consumption is expected in 2010 (8% - 9% y-o-y) as US residential and automotive markets start to improve and manufacturing restocking is already underway. The latter is also expected in China, where the increased demand may climb up to 13% y-o-y.
On the other hand supply will play a key role in 2010. The continued increased capacity in China adds up to the global supply. In conjunction to the western world inventories being tight up in financing deals, new capacity growth in Middle east and in India add up to global supply. The production balance is expected to be at the level of 1 Mt to 1.50 Mt.
Therefore, the event that the financing deals may not be renewed later on in 2010 and in combination with the increased capacity of Middle East and India, could once again, lead to a downward pressure to the price, milder though than that experienced during the beginning of last year.