LONDON (Reuters) – Aluminum market deficits are set to deepen, but the market is likely to rebalance once the dust settles after U.S. sanctions on Russian producer Rusal, leaving prices little changed, a Reuters poll showed.
Prices on the London Metal Exchange soared by a third, lifting the metal to its highest in nearly seven years, after the United States imposed sanctions this month against billionaire Oleg Deripaska and his company Rusal, the world’s No.2 aluminum producer.
However, much of those gains were lost after the deadline to comply with the sanctions was extended by several months. “Sanctions against Rusal are the main market theme. However, according to our estimates, restarts of U.S. capacity and excess capacity in China should easily compensate for lower Russian exports,” said Daniela Corsini, commodity market economist at Intesa Sanpaolo in Milan.
The median forecast of 32 analysts for the average 2018 LME cash aluminum price was $2,150 a ton, down 3 percent from Friday’s close but slightly higher than the $2,097 forecast in the previous poll in January.
Analysts raised their forecast for this year’s aluminum deficit to 550,000 tonnes, up 52 percent from the January poll, and nearly quadrupled their estimate for a 2019 shortfall to 588,500 tonnes.