GREATER OBSTACLES

Only a reversal of tighter global monetary policy and the revival of China’s property market will improve the fundamentals of the global aluminium sector

The global aluminium market is currently depressed. Prices of the metal at the London Metal Exchange (LME) have fallen by around 40% from their peaks.

The fall in aluminium prices is led by worries about recession in developed economies, weaker Chinese demand, and hawkish monetary policy by global central banks.

However, more recently, there were reports that the US was mulling a ban on Russian aluminium in response to the conflict in Ukraine. This led to a brief rally in global aluminium prices in anticipation that the move would create scarcity for the metal globally.

Russia is the third largest aluminium producer in the world with an annual capacity of 3.9 million tonnes (MT) and around 7% of global production. The global aluminium market is around 70 MT. What will ensure that this rally in

Primary Aluminium Supply (mmt) 

prices sustains? Analysts are of the view that the aluminium market is currently steering away from the conventional metric of demand and supply. Many blame the global central bank-led disruption of sucking out liquidity from the financial system for the depression in aluminium prices. THE GREAT FALL

Spot prices at the LME averaged US $2,477/tonne in 2021 and peaked at US $3,878/tonne in March. Aluminium prices averaged US $2,355/tonne during the July-September quarter, falling by 18.6% from average prices in the previous three months.

In fact, aluminium prices hit their lowest in nearly 9 months at US $2,080/tonne during September-end. Now the prices are stabilizing at around US $2,300/tonne.