May 16 – Aluminium stocks on the London Metal Exchange (LME) are already at their lowest level in nearly 17 years and could fall further in the coming days or weeks as more aluminium leaves LME warehouses for supply-starved Europe.
Record electricity prices in Europe are pushing up the cost of producing metals such as aluminium. Aluminium is widely used in the energy, construction and packaging industries.
Western Europe accounts for about 10 per cent of global aluminium consumption, which is expected to be about 70 million tonnes this year.
Citi analyst Max Layton said in a recent report that aluminium supply risks are still rising, with around 1.5-2 million tonnes of capacity at risk of closure in Europe and Russia over the next 3-12 months.
The shortage in Europe has led to a sharp drop in LME aluminium stocks, which have fallen 72% since March last year to 532,500 tonnes, the lowest level since November 2005.
More worryingly for the aluminium market, registered warehouse receipts stood at 260,075 tonnes, the lowest level on record, and stocks are likely to fall further as more aluminium leaves LME warehouses.
“Aluminium prices have continued to rise since Friday after registered positions fell to record lows, reflecting tight supply in markets outside China,” said Wenyu Yao, an analyst at ING (Netherlands International Group).
“But supply growth in the Chinese market has outpaced demand …… due to the new crown pneumonia-related blockade and (Chinese) demand has been weak.”
Benchmark LME aluminium prices touched a one-week high of $2,865 a tonne earlier on Monday.
Concerns over LME spot supply have narrowed the spot discount to three-month aluminium to $26.50 a tonne from $36 a week ago.
The spot market duty-paid premium (above the LME benchmark price) paid by European consumers for aluminium is now at a record high of US$615 per tonne.
China’s aluminium production hit a record high in April as restrictions on electricity production eased, allowing smelters to expand operations, data released by the country’s National Bureau of Statistics showed on Monday.
China is the world’s largest producer and consumer of aluminium. The statistics bureau announced that China’s primary aluminium (electrolytic aluminium) production in April was at a record high of 3.36 million tonnes, up 0.3% year-on-year.
Post time: May-17-2022