The US dollar had been strong against many currencies - other than the New Zealand and Australian dollars - which had pushed aluminium prices below the average cost of production.
"Overall, our view is that the aluminium market remains challenged, and we don't see much ratings upside for the companies we rate in the sector," S&P said.
"Although we expect pricing to increase as global economies stabilise and begin to expand, we don't expect [much] upside, given capacity."
Continuing prices at current levels would place pressure on most producers, and S&P estimates about half the industry is "underwater" at current prices. But the outlook is not all doom and gloom.
In its latest quarterly commodities review, Deutsche Bank said global demand for aluminium was expected to remain soft in the short term.
"However we do believe the impact of what increasingly seems to be globally synchronous monetary stimulus will ultimately support a minimum level of economic activity globally and result in a modest recovery in aluminium prices into mid-2013," the bank said.
S&P's report will be required reading for Rio Tinto - the ultimate majority owner of New Zealand Aluminium Smelters (NZAS) which owns and operates the Tiwai Point aluminium smelter near Bluff - as the company bundles Tiwai with 12 other smelter assets for sale under the new name, Pacific Aluminium.
Last week, state power generator Meridian Energy resumed talks with NZAS regarding requested changes to 18-year contracts for power supply that start on January 1. NZAS wants to renegotiate its existing electricity supply deal with Meridian, which is on the Government's list for partial privatisation.
NZAS is 79.3 per cent owed by Rio and 20.64 per cent owned by Japan's Sumitomo Chemical.
Tiwai, which started in 1971, contributes $506 million to the Southland economy, or 10.5 per cent of Southland's GDP, according to the company's website. In a statement this month, NZAS said it had completed its plan to reduce the size of its organisation by 100 roles by the end of November.
"NZAS continues to face increasingly difficult economic conditions and is still losing money," it said. "We continue to try and work with our key suppliers and stakeholders to reduce costs and grow revenues."
Rio's decision on Tiwai will be against the background of widespread industry "curtailment" - plant closures or reduced production. In January, America's Alcoa announced the closure or curtailment of 531,000 tonnes of smelting capacity. Of that, 291,000 represented the permanent closure of capacity in Tennessee and Texas that had been idle since 2009.
In March, Rio announced that it would close its Lynemouth smelter in the United Kingdom.
In September, Alcoa began the closure of its aluminium smelter at Portovesme in Sardinia.
Closer to home, the Kurri Kurri aluminium smelter in the Hunter Valley region of New South Wales was shut down in June by its owner, Norway's Norsk Hydro, and Alcoa has also been reviewing production at its Point Henry smelter in Victoria.
Over the past 12 months, prices have traded at US$1836 to US$2353 ($2176 to $2788) per tonne.
At around US$2000 a tonne, the economics of producing aluminium become borderline for about half the world's producers.
NZAS may well be losing money, but it's in good company.
Russia's Rusal - the world's largest aluminium producer - recently reported its worst quarterly result since 2008 and Alcoa has just reported a third-quarter net loss of US$143 million.
In the big picture, economists at S&P project that the Chinese economy will experience a "soft landing", with GDP growth decelerating to about 8 per cent in 2013.
"As a result, we have a negative view on steel and aluminium in Asia, as both sectors will likely continue to struggle with softening demand and abundant supply," it said.
"Chinese weakness could also spill over globally as excess Asian supply disrupts others markets throughout the world," the agency said.
Long term, demand for steel and aluminium was likely to be robust, given the region's economic growth potential, continuing industrialisation, and infrastructure investment.
"A more precipitous decline in China's growth rate would, however, further reduce demand for key commodities and increase metals oversupply, pressuring prices."
Big contributor
$506m contribution to the Southland economy.
The equivalent of 10.5% of Southland economy.