Aluminum continues to rise in price, and many experts expect this trend to continue, noting the growing demand for the metal with a possible shortage of supply.
The price of aluminum futures with delivery in three months at the London Metal Exchange (LME) on Friday rose to $ 2897 per ton, updating the highest since June 2008. The market is growing amid risks related to bauxite supply from Guinea after the coup d'etat in this country and aluminum production reduction in China as a result of CO2 emission reduction policy. Analysts at Citigroup and Goldman Sachs have raised their aluminum price forecasts, while Saad Rahim, chief economist at Trafigura Group, told Bloomberg that they expect prices to rise to record levels. Citigroup expects the average aluminum price to be $2475 a ton this year and $3010 a ton in 2022.
The metal could rise to $2900 a tonne in the next three months and to $3100 a tonne within 6-12 months, Citi experts expect. "Our forecast assumes a global aluminum deficit of 1.1 million tons this year due to China's compressed supply structure, and we forecast a 3 million-ton deficit for 2021-2023," the Citi review said. Meanwhile China Nonferrous Metals Association considers that shortage of supply in aluminum market is not substantial and demand is not strong enough to justify current price level. High aluminum prices will lead to lower demand and force consumers to seek substitutes for the metal, which could cause the market to collapse quickly, the association said.
According to Jorge Vasquez, managing director of Harbor Intelligence, the momentum for aluminum demand has already passed its cyclical peak. "We're seeing structural demand weakening in China, and the risk of an economic downturn or financial crisis is growing," Vasquez said during an industry conference in Chicago on Thursday. The price of aluminum has nearly doubled since the start of this year, in part because of Chinese authorities trying to cut CO2 emissions, including by curbing fairly energy-intensive aluminum production. According to estimates of Australia & New Zealand Banking Group (ANZ), as a result of restrictions, Chinese companies in 2021 will produce 1 million tons of aluminum less than they could. In this regard, the deficit of metal in the aluminum market this year will amount to 750 thousand tons, ANZ forecasts.