The analyst suspected that producers would wait to be sure that prices were down for a sustainable period and not just due to speculators' actions. "For now, the funds basically have fled the market, going from big long positions to neutral to small shorts," he said.
And this is because of a fear of a breakdown in the European banking system and its subsequent effect on the euro.
Charles Bradford, a partner at New York-based consulting firm Affiliated Research Group, would not specify a price that would elicit cutbacks as "everyone's cost is specific," but he agreed that prices would need to be at a certain trigger level for a sustainable period.
Bradford added that for Europe, he was not sure 90 cents/lb for aluminum would spur cuts, "but at 60 cents aluminum, there would be lots of curtailments."
He said the euro would need to strengthen to get the LME price to rise again. While some smelters in the US had production and labor issues, leading to potential cuts, most of the curtailments would come from China, he added.
Bradford said he expected an aluminum surplus this year of 1 million mt, and his forecast for Chinese production this year is 17 million mt, up from 13 million mt last year. "That's a pretty big increase," he said, adding that a 1 million mt surplus is "grossly excessive by any standard."
He noted that most likely the metal locked in LME warehouses may not be a factor in the supply. .
The 4.5 million mt of aluminum that is tied up in LME warehouses is under financial arrangements and may not be available for a while, but "if the warehouse metal hits the market, we will see more of a surplus. This is not something that will happen immediately, but the risk is there for additional supplies," he said. (See related chart: Aluminum LME stocks, January 2009 - June 2010).
Analysts also said that producers do not take curtailment decisions lightly as it costs about $1 million-2 million to restart a single potline. "It costs a lot to shut down and restart, and no one wants to do that if the [aluminum price] comes back up," Bradford said.
US market sources said that producers saw $2,000/mt as a key level. "I think prices need to be below $2,000 for a long period of time before they address that [curtailments]," said a trader. "It was scary for them [producers] when prices were nearing $1,800."
The LME cash aluminum price hit $1,825 in early June. "That was definitely a pressure point," the trader said.
An Alcoa spokesman said: "We've always said that we make adjustments based on a number of aspects, including overall market conditions ... which itself has a number of elements."
And this is because of a fear of a breakdown in the European banking system and its subsequent effect on the euro.
Charles Bradford, a partner at New York-based consulting firm Affiliated Research Group, would not specify a price that would elicit cutbacks as "everyone's cost is specific," but he agreed that prices would need to be at a certain trigger level for a sustainable period.
Bradford added that for Europe, he was not sure 90 cents/lb for aluminum would spur cuts, "but at 60 cents aluminum, there would be lots of curtailments."
He said the euro would need to strengthen to get the LME price to rise again. While some smelters in the US had production and labor issues, leading to potential cuts, most of the curtailments would come from China, he added.
Bradford said he expected an aluminum surplus this year of 1 million mt, and his forecast for Chinese production this year is 17 million mt, up from 13 million mt last year. "That's a pretty big increase," he said, adding that a 1 million mt surplus is "grossly excessive by any standard."
He noted that most likely the metal locked in LME warehouses may not be a factor in the supply. .
The 4.5 million mt of aluminum that is tied up in LME warehouses is under financial arrangements and may not be available for a while, but "if the warehouse metal hits the market, we will see more of a surplus. This is not something that will happen immediately, but the risk is there for additional supplies," he said. (See related chart: Aluminum LME stocks, January 2009 - June 2010).
Analysts also said that producers do not take curtailment decisions lightly as it costs about $1 million-2 million to restart a single potline. "It costs a lot to shut down and restart, and no one wants to do that if the [aluminum price] comes back up," Bradford said.
US market sources said that producers saw $2,000/mt as a key level. "I think prices need to be below $2,000 for a long period of time before they address that [curtailments]," said a trader. "It was scary for them [producers] when prices were nearing $1,800."
The LME cash aluminum price hit $1,825 in early June. "That was definitely a pressure point," the trader said.
An Alcoa spokesman said: "We've always said that we make adjustments based on a number of aspects, including overall market conditions ... which itself has a number of elements."
