Aluminum prices are likely to rise from current levels due to supply issues

Global aluminum prices hit a five-month high this month amid economic growth and growing supply concerns. Analysts believe prices are likely to rise from current levels.

“We are revising our 2024 aluminum price forecast to $2,450 from $2,400 per tonne, reflecting our expectation that prices will rise above the current average driven by a combination of more resilient individual market performance and broader market performance,” it said. research agency BMI. Fitch Solutions division.

On November 7, three-month aluminum futures on the London Metal Exchange (LME) reached a five-month high of $2,710 per tonne. They are currently valued at $2,625. Aluminum prices are up more than 10 percent year to date and 18 percent year over year.

New optimism

BMI said bullish sentiment for aluminum had returned in recent weeks. “This new optimism is driven by two key factors: growing supply concerns in the commodity market and broader economic developments,” it said.

Trade economy The site, citing estimates from market players, reported that China recently announced that it would end tax breaks on exports of semi-finished aluminum products as of December 1, which would remove about five million tons of supplies from the international market. “China’s end to its export tax rebate policy is expected to increase the value of Chinese aluminum in the international market,” said ING Think, the economic and financial analysis arm of Dutch multinational services company ING.

It said the EU recently decided to impose significant tariffs on Chinese-made electric vehicles (EVs), citing unfair government subsidies that allowed Chinese manufacturers to undercut European competitors.

Bauxite prices hit record levels

“This pressure could lead to the removal of subsidies that its trading partners consider unfair,” ING Think said.

China’s move has sent bauxite prices near record highs as Guinea blocked Emirates Global Aluminum from exporting from the country. The shutdown of the world’s largest miner has reduced bauxite production in Australia and Jamaica, pushing Chinese smelters out of supply and sending ore inventories to their lowest levels since 2015.

“…we do not expect prices to reach the highs seen earlier this year, when supply issues sparked a brief rally that took prices to a one-year high of $2,768 per tonne,” BMI said.

ING Think said China’s decision could lead to a change in trade dynamics, with countries that rely heavily on Chinese aluminum may have to look for alternative supply sources to fill the gap left by declining Chinese exports.

The World Bank, in its commodity outlook, said global demand for aluminum is expected to remain resilient over the forecast horizon, driven by increased use of renewable energy technologies such as solar panels and electric vehicles, as well as increased needs for electricity grid infrastructure.

“Rising demand must be met by robust supply growth in Africa, Asia and the Middle East, as well as the recovery of Europe’s largest smelters, which have cut production due to high energy prices caused by Russia’s invasion of Ukraine – aluminum production in Europe has fallen by almost 15 percent from 2021 to 2023,” the statement said.

The Australian Office of the Chief Economist (AOCE) said easing monetary policy and growing global demand for new, energy-efficient vehicles and technologies would increase aluminum use and keep inventories relatively low.

“Western Australia’s FOB (free-on-board) alumina price is forecast to decline in 2025 and 2026 due to expected production growth in China and a recovery in Australian supplies,” it said.

Chinese expansion in Southeast Asia

China, the world’s largest aluminum producer, is expanding smelting operations in Southeast Asia as it approaches a self-imposed domestic annual production cap of 45 million tons, the World Bank said.

“Following an expected 10 percent year-on-year increase in 2024, aluminum prices are forecast to remain stable in 2025 before rising 4 percent in 2026, supported by robust demand,” it said.

AOCE forecasts the LME aluminum price to rise 6.2% year-on-year in 2024 to average around $2,390 per tonne.

BMI said it maintained its view of a tightening market balance in 2024, with demand growth outpacing supply and creating an environment that could support higher prices.

“Looking at demand, we remain optimistic that global aluminum demand will rise in 2024, rising 3.2% year-on-year to 70.35 million tonnes,” it said.

ING Think notes that in the near future, the abolition of rebates will make Chinese aluminum more expensive on the international market and could lead to a reduction in export volumes.