Aluminum inventories in warehouses monitored by London, New York and Shanghai exchanges may rise to 4.5 million metric tons by November without further production cutbacks, Sanford C. Bernstein Ltd. said. Companies must close 2 million tons, or 5 percent of “pre- crisis capacity,” to halt the climb, Andrew Keen, an analyst at Bernstein in London, wrote in a report. Inventories of about 3.7 million tons include a record 3.5 million tons in warehouses scrutinized by the London Metal Exchange. “The market is in surplus, and that will last until October or November unless the industry does something proactive,” Keen said today in a telephone interview. Aluminum for delivery in three months dropped $20, or 1.4 percent, to $1,455 a ton at 10:14 a.m. on the LME. Prices have slid 57 percent from July’s record $3,380.15 a ton as recessions in the U.S., parts of Europe and Japan reduced demand for cars and other items containing the lightweight metal, used in industries from packaging to aerospace. Smelters idled 5.4 million tons of capacity by the end of March, with two-thirds in China, the world’s largest producer, according to Bernstein. Aluminum Corp. of China Ltd., China’s largest aluminum maker, had 45 percent of capacity inactive, Norsk Hydro ASA wasn’t using 30 percent, Alcoa Inc. closed 19 percent and United Co. Rusal idled 11 percent, Bernstein said. “What we need is not for the market to get better, but to stop getting worse, and we’re not there yet,” Keen said. “Nothing is happening in steel, nothing is happening in aluminum” to indicate a rebound for now, he said. A price revival that he forecasts is based on expectations of more production cutbacks as manufacturers use up their own stockpiles, Keen said. Aluminum for immediate delivery will average $2,500 a ton next year, he said, compared with about $1,369 so far in 2009. Keen is the most accurate forecaster in Bloomberg’s weekly copper survey.

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