Aluminum Prices Going Nowhere Through 2011

A growing consensus is emerging that aluminum prices over the next couple of years are going to remain largely level, and will fluctuate between $1,900 and $2,100 a ton during that time.

The global economic picture, along with the oversupply of aluminum are the major factors cited by economists and analysts as to the reasons for that outlook.

Within those general parameters, aluminum prices are expected to be volatile, mostly on the ongoing battle of China against inflation in their urban property markets, as well as the continuing European debt crisis.

Although demand has been looking good over the long term, the supply is high, and that is negating the increase in demand as far as aluminum prices go, and new aluminum smelters make supply an issue going forward, as it should increase even more as they go online.

Some erratic pricing behavior for aluminum will arise from the inventory deals which could limit supply during certain periods of time, which will be part of the fluctuation in prices mentioned above, but over time that won't have any significant impact on aluminum prices until demand reaches levels where it can't be supplied, which doesn't look to be any time soon.

One new element which isn't being talked about much yet, but which could dramatically change the aluminum demand picture is the news that new aluminum-backed ETFs are going to launch in the latter part of 2010, which could create the type of demand mentioned, changing the overall picture for aluminum.

In that regard, aluminum suppliers could have a harder time meeting demand in the future, increasing the price, but a lot of things have to fall into place for these ETFs to become major aluminum players; like getting the type of financing to take them through the challenges early stages, which is far from guaranteed at this time, but could end up happening over the next several years.

Aluminum looks good over the long term, along with aluminum producers, but in the short term there's very little to get excited about, other than the shares of aluminum companies going down, which will give investors good entry points to invest.