In aluminium's Midwest spot market, prices averaged $1.24/lb in the fourth quarter, an increase from the $1.20 average price in the third quarter. And just now, primary ingot costs $1.25. However, the price of alumina – the raw material used to make aluminium – fell sharply during the quarter and that could cut future spot aluminium price tags.

"The drop in the spot market can be attributed to the ramp up of alumina production in China, leading to reduced spot demand throughout the world market," writes analyst Kuni M. Chen at Banc of America Securities in a report to clients. Just last week, China's National Development and Reform Commission, the country's top economic planner, approved Aluminium Corp. of China's plan to build an alumina production plant with annual output capacity of 800,000 metric tons in Chongqing city.

Atop that, Norwegian company Norsk Hydro is working on an extensive number of projects globally to expand its aluminium metal business. A top priority for its aluminium metal sector in 2007 is delivering new profitable bauxite, alumina and smelter opportunities. So, lower alumina prices – combined with sliding aluminium demand from reduced manufacturing activity – soon could push primary metal tags down as 2007 progresses.

Analyst William Adams at BaseMetals.com e-mails Purchasing.com with the message that "in the short term, expect volatile aluminium trading to continue, but we feel the buyers will become increasingly confident in lower pricing ahead." Note: Purchasingdata.com has forecast $1.24/lb for the first quarter – followed by gradual slippage and $1.16 in the final quarter.