Aluminium: Short supply supports prices despite Gulf outages – Commerzbank
Commerzbank’s Barbara Lambrecht says Aluminium’s recent correction has likely run its course, with prices rebounding as Chinese and LME inventories fall sharply and Gulf smelter outages persist. The Australian Ministry expects primary Aluminium to be significantly undersupplied this year and next, though longer term it sees strong non-Chinese capacity growth, especially in Indonesia, tempering the structural outlook.
Tight market now, capacity boom later
"Stocks could fall below 900 Tsd. tons this month. Aluminium stocks registered on the LME have also been falling significantly since the end of October and have dropped below 300 Tsd. tons for the first time since October 2022."
"Also, in its latest market outlook, the Australian Department of Resources and Energy considers price levels in the market to be well supported. Whilst China has partially offset production losses in the Gulf region, longer-term outages are expected due to damage to the region’s aluminium smelters."
"For example, the Al Taweelah smelter in the United Arab Emirates, with a capacity of 1.6 million tons per year, is likely to be out of operation for 12 months, although the operator announced yesterday that it is working on a faster timeline. The Australian Ministry therefore expects the market for primary aluminium to be significantly undersupplied this year and next."
"In the longer term, however, the Ministry is more pessimistic: whilst demand would remain well supported by the transition to renewable energy and electrification, and there is also a trend towards replacing the more expensive copper with aluminium in the automotive sector, supply – outside China – would also rise sharply: Capacity is growing rapidly, particularly in Indonesia, thanks to increased investment by Chinese investors."
"Capacity is set to expand from 1.3 million tonnes today to 5.3 million tonnes by 2031. At first glance, this is similar to recent developments in the nickel industry, but the scale is different: China retains its dominant market position."
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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