Market Nuggets: BNP Paribas: Aluminum To Fare Better Than Other Base Metals In Weak Economy
25 August 2011, 11:59 a.m. By Kitco News http://www.kitco.com/
(Kitco News) -- Aluminum remains a so-called defensive play among the base metals in the event of a prolonged period of risk aversion, says BNP Paribas. The metal fell by only 12% from late July to early August, compared to 20% for some base metals. The bank?s forecast for world demand growth remains at 9% for 2011, then shaved for 2012 to 7.5%-8% from 8.5%, although with risks ?increasingly on the downside.? One factor helping underpin aluminum is the rise in the average cost of production from a year ago. ?Much aluminium inventory is tied up in warehouse financing deals, but BNP says it would be ?loathe? to make a bullish case for aluminium based on this. ?But they do at least, for now, largely neutralise the bearish implications of excess stocks,? says a report from senior metals strategist Stephen Briggs. ?And there are other factors more convincingly in aluminum?s favor. The industry cost curve suggests the downside is very limited and points to higher prices by 2013, as long as demand stays firm. We remain convinced that the potential downside is far more limited for aluminum than for other base metals, even, and perhaps especially if the world economy takes a serious turn for the worse. In a more benign environment, aluminium may remain more sluggish than most, but we expect the price direction to be broadly upward.?
