Aluminium dips after 10-year high

Chinese manufacturers vow to address “irrational surge”

The price of aluminium dipped on Wednesday, having risen to a 10-year high of $2,729.49 per metric tonne the day before. 

After starting the year at just over $2,000 per tonne, the spot price of the metal has risen steadily, bolstered by surging industrial demand and prolonged supply chain disruption. 

Indeed, the gain constituted an 80% increase from the multi-year low suffered with the onset of the COVID-19 crisis, when lockdowns and border closures imposed by governments to limit the spread of the novel coronavirus severely affected aluminium demand in the key sectors of transportation and aerospace. 

China’s impact 

The current aluminium supply troubles derive not from a lack of ability to locate and extract the bauxite required for its production, but rather from an inability to produce it quickly enough.

The scale and pace of production in China has recently been hampered by the introduction of energy usage regulations, a feature of the nation’s efforts to reduce carbon emissions. Such limits have forced China to step up its own aluminium imports, further contributing to a shift in the warehousing of the metal from Europe and North America to the United States.

The price rise has been further compounded by the wider rise in global shipping costs.

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China’s reaction

With the price of aluminium rising to a 13-year high in Shanghai, the China Nonferrous Metals Industry Association (CNIA) met at the start of the week to resolve what it described as an “irrational surge”.

In a statement, the industry body argued that there was “no obvious gap” between supply and demand and maintained: “Companies will continue to ensure supply and stabilise market expectations.”

Among the 10 companies that participated in the meeting, China Hongqiao and Aluminum Corporation of China have seen their stock price rise by 55% and 98% since the start of the year, respectively. 

By mid-afternoon, spot aluminium traded down 1.3% at $2,685 per metric tonne. 

Aluminum Spot
Daily change
Low: 2462.76
High: 2509.42

Further reading: Commodities struggle after Thursday sell-off

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