Aluminum glut no bar to gains as Barclays says sell

Rusal’s Profit

United Co. Rusal, the world’s largest producer, will report an almost threefold gain in profit to $957.4 million next year, according to the mean of 14 estimates. Shares of the Moscow- based company will advance 11 percent to HK$5.46 in 12 months, according to the average of 18 predictions. Rusal’s costs per ton are $1,936, it said in a presentation Nov. 12.

Some smelters’ margins are being squeezed by rising energy prices, which Bloomberg Industries estimates account for about 26 percent of production costs. Brent, Europe’s benchmark crude oil grade, averaged a record $111.67 a barrel this year and natural-gas futures jumped 12 percent in New York.

Producers using coal-fired power generation may do better after prices for the fuel dropped 24 percent this year in the north-east Chinese port of Qinhuangdao, according todata from IHS McCloskey. About 85 percent of Chinese production uses power derived from coal, according to Wood Mackenzie Ltd., and the nation accounts for 45 percent of global output.

Car Sales

Stronger demand may help ease the glut. Transportation accounts for 25 percent of consumption and construction 24 percent, according to CRU, a London-based researcher. Global car sales will rise 2.5 percent to a record 82.77 million units next year, says LMC Automotive Ltd., a researcher in Oxford, England. An average car has about 140 kilograms (309 pounds) of aluminum, according to the European Aluminum Association.

The International Monetary Fund expects global growth to advance to 3.6 percent in 2013, from 3.3 percent this year. The economy of the 17-nation euro area will expand again from the third quarter, based on the median of 30 economist estimates. China, the biggest aluminum consumer, will keep accelerating for at least the next two quarters, according to the forecasts.

“The market balances generally don’t matter,” said Michael Widmer, a London-based analyst at Bank of America. “What matters is what is happening on the LME. You just have to pay up for getting hold of the metal.”

Bloomberg News

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