Aluminium

Jitters over supply disruptions keep aluminium prices up

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Aluminium prices eased on Tuesday (March 22) after rally but supply woes limited the commodity’s decline.

The most-traded May aluminium contract on the Shanghai Futures Exchange SAFcv1 closed down 0.3% at 22,950 yuan ($3,608.55) a tonne.

Aluminum futures have been rallying since mid-December and hit a record high above $3,800 a ton in the first week of March, as the intensifying Russia-Ukraine war disrupted supply. Russia produced around 3.76mn t of aluminium metal last year, almost 6% of global output, according to data from International Aluminium Institute, the global body for the primary aluminium industry. Sanctions imposed on the country severely disrupted trade flow and supply chains.

“The war in Ukraine remains a key pillar of support for metals and has arguably contributed to the bulk of volatility in recent weeks” Matt Simpson, senior market analyst at City Index told Reuters.

Exacerbating aluminium supply concerns was Australia’s ban on alumina and aluminum ores exports to Russia. Australia supplies almost 20% of Russia’s alumina, the key ingredient for producing aluminum.

The Australian export ban comes just days after Canberra sanctioned Russian oligarch Oleg Deripaska, who owns a stake in Queensland Alumina Limited – a joint venture between Russian aluminium company Rusal and mining giant Rio Tinto. The latter has promised to sever all business ties with Russia.

Meanwhile, Germany-based TRIMET is also due to cut aluminium production at the Essen facility by 50% due to higher energy prices.

(The world’s leading primary aluminum producing companies in 2020, based on production output- in million metric tons Source: Statista)

Aluminum inventories in exchange warehouses are running critically low. Data show stocks of aluminium in LME-registered warehouses MALSTX-TOTAL were at 704,850 tonnes, its lowest level since 2007. Inventories in Shanghai exchange warehouses AL-STX-SGH fell 4.2% to 333,823 tonnes last week.

A research note from Goldman Sachs earlier this month stated that the only way that prices could fall in the current environment is a significant destruction of demand.

Aluminium is seen as one of the key renewable metals in the transition to a greener and low-carbon economy.

With reporting by Reuters, Al Jazeera