Int.-After falling from 3-year high, aluminum prices could rise further | fonderie-planet.com
Chinese production could be affected, global demand rising, analysts say
Although aluminum prices have fallen from their three-year high earlier this month, they are expected to rebound this year as production growth in China is expected to fall below initial estimates and demand from other parties. of the world is likely to increase.
Last month, US rating agency Fitch Solutions said it was revising its aluminum price forecast to $ 2,050 per tonne from $ 1,850 for this year because “the market is currently tight in the middle. supply problems at a time when demand for manufactured products is picking up sharply “.
Global demand is expected to remain strong, leading to a widening supply gap, according to Dutch multinational financial services company ING. London Metal Exchange aluminum futures closed at $ 2,434 a tonne over the weekend. Metal prices hit a three-year high of $ 2,535 earlier this month before falling below $ 2,450. On Monday, the metal traded for $ 2,961 on the Shanghai Stock Exchange, compared to $ 3,117 on May 10. This year, aluminum prices have increased by 26.5%. Last week they increased 6.6 percent.
Prices surged after Chinese aluminum imports rose 36 percent in April. Economics of commerce The website predicted that the price of non-ferrous metals would rise to $ 3,000 by the end of next year as traders see the market under-supplied by 480,000 tonnes. The supply shortage is expected to reach 1.08 million tonnes in 2023.
Dutch multinational financial services company ING sees the global aluminum market continue to contract around 2025. One of the leading aluminum companies, Alcoa, said in its first quarterly results that 2021 will be strong for aluminum on the basis for continued economic recovery and increased demand for the metal.
Wenyu Yao, senior raw materials strategist at ING, wrote in his analysis that efforts to reduce carbon emissions would have a dual implication for aluminum. As supply growth in China will be restrained, global demand for non-ferrous metals will increase given sectors involved in energy transitions such as transport and renewables.
Transition to the green economy
Fitch Solutions has also endorsed the view that aluminum prices will be high in the coming years, as its demand will be supported by the accelerated shift to a green economy. According to the US rating agency, aluminum consumption last year was 60.51 million tonnes (mt) against production of 65.13 mt. This year, demand is expected to increase to 62.36 mt and production to 67.60 mt. According to International Aluminum, an organization of bauxite, alumina and aluminum producers, last year’s production was 65.29 t compared to 63.65 t in 2019.
Of this total, China contributed 37.33 mt last year (35.79 mt). From January to April of this year, world aluminum production was 22.21 t compared to 21.34 t in the same period a year ago.
Fitch Solutions said Chinese production hit a record 37.1mt last year and is expected to grow 2% this year with an additional 3mt capacity to come. China has set a ceiling of 45 tonnes for aluminum production. From January to March of this year, China’s primary aluminum production was on average 6.3 percent higher than the previous year.
ING’s Yao said China’s carbon emissions topped 420 tonnes last year. With its production capacity capped at 45 mt, Beijing is expected to look for a secondary supply of the metal, mainly from scrap, creating great uncertainty. The secondary supply had to grow at a compound annual growth rate of 5.8%, which is higher than the supply of primary aluminum. Chinese production growth is expected to be 5%, which is lower than the initial projection of 7% for this year, the ING analyst said.
Other issues such as capping energy emissions in areas of China such as Inner Mongolia, where there are controls such as energy intensity per GDP and total energy consumed, and capping energy production. Primary aluminum in China are likely to disrupt production, Yao said. Analysts say that migrating smelters to Yunnan province to enjoy cleaner and competitive hydropower was also problematic, as smelters were told to cut their peak consumption by 10 percent due to the shortage of electricity. coal. On the other hand, demand from China continues to be strong, especially in the wake of the growth in production of electric vehicles and the increase in the levy of aluminum in cars.
Imports on the rise
This is one of the reasons why Chinese aluminum imports are high this year. This led the Communist nation to compete with other nations for supplies. It is this situation that will likely keep prices higher, says Yao.
Fitch Solution expects aluminum prices to remain strong in the near term due to strong demand amid supply issues, which may ease later this year. However, China easing restrictions on imports of scrap aluminum could help improve supply and improve stocks globally. This is the risk facing the rise of the metal.