China lockdowns to weigh on aluminium prices

Near term aluminium is expected to trade between US$2,200 to US$2,500 on the back of persistent lockdowns in China, which has dampened global demand, analysts say. — AFP photo

 

KUCHING: Near term aluminium has been projected to trade between US$2,200 to US$2,500 on the back of persistent lockdowns in China.

RHB Investment Bank Bhd (RHB Investment Bank) recapped that London Metal Exchange (LME) aluminium prices have plunged to a low of US$2,155 per tonne from its peak of US$3,878 per tonne in March, representing a 44 per cent correction.

“While the persistent hawkish tone by the US Fed is expected to weigh in on LME prices in the near term, LME inventory remained low at 332,175 tonnes as at end September – likely attributed to the potential slowing down in demand as a result of global recession, and zero-Covid policy in China, which has negatively impacted demand for aluminium,” RHB Investment Bank noted.

The research firm further noted that LME had recently put up a discussion paper to consider a potential ban on new supplies of Russian metals (including aluminium) to be delivered under its network of warehouses.

“Should this lead a ban being implemented, it could pose a potential upward reversion on LME aluminium prices.

“Recall back in April 2018, LME aluminium prices soared 25 per cent during the month after the US imposed sanctions on Russian aluminium smelters (including the world’s second largest smelter Rusal).

“Russia currently accounts for six per cent of global aluminium production.”

RHB Investment Bank highlighted that apart from the potential sanction on Russia, the latest production cut from Europe’s largest aluminium smelter (Aluminium Dunkerque Industries France announced to reduce its production by 22 per cent starting October 1) will further aggravate the current tight supply situation of global aluminium.

“In terms of our LME aluminium spot price forecast, we expect near term aluminium to trade between US$2,200 to US$2,500 on the back of persistent lockdowns in China, which has dampened global demand.

“While supply constraints are expected to anchor aluminium prices in the near term, we expect the immediate turnaround on the demand side to be largely driven by increasing demand from aluminium packaging in the beverage industry, electric vehicle (EV), and aerospace sectors, whereas the wild card remains on China’s decision to scrap its zero-Covid policy.”

All in, the research firm’s 2022-2023 LME aluminium price assumptions were lowered to US$2,450 and US$2,300 from US$2,500 and US$2,550.

from Borneo Post Online https://bit.ly/3eyVM2C
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