Aluminium rises over sinking stocks, looming output cuts
ALUMINIUM MAIN TAINED its bullish motion as the amount of available metal in London Metal Exchange (LME) warehouses dropped sharply. This has sparked concerns as traders begin to worry that high energy costs would force more smelters to cut output, worsening a supply shortage.
Currently, on-warrant stocks of aluminium in LME-registered warehouses are at the lowest since 2005, stumbling from more than 861,800 tonnes on December 14 to stand at 536,175 tonnes.
Benchmark aluminium on the
LME traded 0.3 percent higher at $2,930 a tonne, up around 4.5 percent for the week, inching nearer to a 13-year high of $3,229 a tonne recorded in October 2021.
Commenting on the price surge, Daniel Briesemann, Commerzbank analyst, said energy prices have jumped in Europe and Asia and more smelters will likely cut production, pushing aluminium prices higher.
Briesemann, however, raised optimism of a recovery in supply and price correction later in the year.
“Once we get out of winter, we should see a correction because more supply should be available again,” he said.
According to Bank of America commodity analysts, energy usually accounts for around 40 percent of aluminium smelters’ operating costs.
“With around 650,000 tonnes of capacity cut so far, we believe that another 900,000 tonnes of output is at risk of closing down fully or partially over high energy prices,” they said.
They also observed that output cuts in top producer China pushed the market into deficit in 2021, while Europe’s power crunch also sparkes a smelter meltdown of the lightweight metal.
It was further predicted that the deficit would rise to 2.7 million tonnes in 2024, when prices would be expected to jump to $3,500 a tonne.
Other base metals on the LME also traded higher as copper gained 0.6 percent to $9,592 a tonne, zinc was up 0.8 percent to $3,577.50 a tonne, nickel rose 1.4 percent to $20,675 a tonne, lead advanced 0.2 percent to $2,312 and tin jumped 2.5 percent higher to $40,100 a tonne.