Measuring the fallout as the aluminum bubble bursts

Nov 01, 2008 | 11:06 AM |

When a bubble bursts, it doesn't take long for the gas to escape.

As recently as September, much of the aluminum industry appeared confident that prices would rise in 2009. An average approaching $3,500 per tonne could be expected, analysts said with a degree of conformity that was almost disturbing.

Even when the unraveling of the financial markets gathered pace with the collapse of investment bank Lehman Brothers and the bailout of insurance giant AIG, plenty of observers remained confident that strong fundamentals and a high cost base would keep aluminum flying high.

How quickly things change. Analysts now are busy rewriting their aluminum price forecasts for next year, as are many businesses who are faced with a far worsening outlook for their financial performances in 2009.

The initial rejection by Congress of the proposed $700-billion bailout plan seemed to be the event that finally brought home to analysts and the wider public just how serious a crisis the world's markets are facing. Confidence in the growth prospects of the U.S. and European economies has finally worn thin, and aluminum, copper, steel and other metal markets are now starting to pay the price.....