Aluminum was charged to a 10-year high in London, extending a year-long rally as demand increases and supply of the generally abundant metal comes under pressure.
Prices rose as much as 2.9% to $ 2,726.50 on the London Metal Exchange, reaching the highest level since 2011 and approaching an all-time high above $ 3,300 a tonne. That is fueling broader inflation concerns with Goldman Sachs Group Inc, Citigroup Inc. and Trafigura Group among those forecasting higher earnings as the industry prepares for a potentially seismic shift toward ever deeper deficits.
Supply is increasingly challenged, especially in China, the main producer. The energy-intensive aluminum industry has come under the radar of Beijing during the pollution crackdown, while a seasonal energy crisis has also affected production. That momentum continued this week when Guangxi province, an aluminum hub in the southwest, moved to cut production.
“Recently, a series of Chinese policies have affected aluminum production, driving prices up,” Wei Lai, an analyst at TF Futures Co., said by phone from Shanghai. “The policies that include the power consumption limit are expected to remain in place for the rest of the year. So the bullish momentum is still for aluminum. Prices can hardly fall as long as demand remains intact. ”
The metal, used in everything from auto parts to beverage cans to home appliances, performed particularly poorly early in the pandemic, but is now enjoying a strong resurgence as consumer demand and activity rise. economically recover.
In the coming years, it appears that demand will skyrocket in electric vehicles and renewable energy, and efforts to curb the aluminum industry’s heavy carbon footprint could spell the end of a decade-long era of oversupply.
The rally is creating a big windfall for producers who have been plagued by low prices for years and have often been pumping metal at a loss. But gains over the past year are adding more fuel to inflation concerns as manufacturers increasingly look to pass on costs to consumers.
Aluminum was up 2% to $ 2,703.50 a ton on the LME at 9:25 am in London. The metal has recovered nearly 40% this year on the LME, second only to tin among the six base metals. LME aluminum orders rose 10% on Tuesday, the most in two months.
China produces about 60% of the world’s aluminum, and production concerns prompted some of the country’s largest foundries to take a video call on Monday in which they pledged to secure supply and prevent malicious speculation and irrational price increases. .
China is freeing up state reserves to boost supply, but with producers scrambling to increase production, many analysts see the market to remain tight in the coming months.
© 2021 Bloomberg