CHICAGO Century Aluminum
Co. has been hit by a global drop in commodity
pricesperhaps driven by speculationat the same time
that aluminum capacity continues to increase, according to
president and chief executive officer Michael Bless.
Cash prices for aluminum on the
London Metal Exchange averaged around $2,000 per tonne in the
first quarter, roughly on par with the fourth quarter of 2012,
Bless said during a conference call with analysts. But March
saw a "rapid" decline in LME prices to a range of $1,850 to
$1,900 per tonne.
"Weve obviously seen a
significant sell-off in prices of all commodities," he said.
"The price action has appeared seemingly indiscriminate, with
no evidence of most of the normal relationships and
correlations to which we are all accustomed."
LME stocks were "relatively
flat" during the quarter, and U.S. Midwest premiums continued
to hold at historically high levels just shy of 11.5 cent per
pound, Bless said. European premiums may have softened, but
those in Japan remain "very strong."
Given such contradictory
indicators, the Monterey, Calif.-based aluminum producer has
found the overall market tough to read, Bless said. While some
market segments in the United States have been "off a little
bit from a growth perspective," most remain "pretty good."
Despite significant local
variations, markets globally are generally either balanced or
experiencing only a "modest surplus," while fundamental data is
"stable if not robust," Bless said. "Therefore, we believe that
speculative activity and other forces are at work in driving
the prices of ... commodities, in addition to legitimate
concerns about global fundamentals."
Bless conceded that about 45
percent of global aluminum production capacity is currently
operating at a cash loss, but he pointed out that much of that
loss-making capacity is in China.
Production cuts have been made
in higher-cost regions of China, as well as in Europe, Bless
said. In addition, Moscow-based United Co. Rusal has announced
plans to curtail 300,000 tonnes of production (
amm.com, March 4).
But those moves wont be
enough to counteract new capacity being added in western China,
where power is less expensive, and in the Persian Gulf, he