Aluminum Prices Soar to Highest Since 2008

Shanghai Aluminum continued to maintain its strength after the Spring Festival, and both electrolytic aluminum futures and spot prices rose sharply, and the spot price exceeded 22,000 CNY/ton.

Three-month aluminium on the London Metal Exchange (LME) rose 2.6% to $3,170 a tonne on Feb. 8, after hitting a high of $3,172 a tonne since Oct. 19. Aluminium inventories in LME-approved warehouses fell to 768,250 tonnes, the lowest since February 2007. The premium for LME spot aluminium to the three-month contract has risen to $40 a tonne, the highest since July 2018, signaling tighter supplies nearby.

On February 9, the domestic futures market opened, the main Shanghai aluminum futures contract continued to rise, the disturbance of the aluminum supply side increased again, and the accumulation of domestic aluminum ingots was less than expected.

Behind the surge in aluminum prices, on the one hand, energy prices in regions dominated by Europe have soared, resulting in huge cost pressures for smelters. On the other hand, as the world's major aluminum exporter, the dispute between Russia and Ukraine has once again cast a worrying shadow on global aluminum supply.

In addition, Baise City, Guangxi, as the main producing area of electrolytic aluminum and alumina in South China, the epidemic has caused great pressure on the production and transportation of local enterprises, pushing up the market aluminum price. According to public information, Baise City, Guangxi Province is the third largest alumina producer in China, with a total of five alumina enterprises in the region, with a total production capacity of 9.45 million tons.

In order to prevent the spread of the Omicron virus strain, the prevention and control of the epidemic in Baise, Guangxi has been upgraded, requiring all employees to be quarantined at home from 0:00 on February 7, and the implementation of "no entry and exit" measures across the region. Alumina enterprises will also face difficulties in purchasing raw materials The production line had to be compressed, and the outward transportation of alumina was also affected. Overall, alumina prices are expected to continue to rise this month.

In addition to Baise's plans to reduce and suspend production due to the impact of the epidemic, aluminum oxide production in Jinluyu area has been reduced and suspended due to environmental protection policies after the Spring Festival, and a series of overseas production reduction news have pushed up aluminum prices. The general analysis in the industry believes that according to the situation of clearing the epidemic situation in various regions, it is difficult to recover in a short period of time.

In fact, aluminum prices have already achieved a sharp rise in 2021, increasing by 42% for the whole year, and have increased by about 14% so far in 2022.

At present, with the rise of aluminum prices, Guotai Junan's research report on February 7 said that the current profit per ton of aluminum is about 4889 CNY/ton. Industry insiders said that aluminum prices are expected to remain high, and the profits of related companies are expected to continue to improve.

In its 2022 outlook report, Supplychaindrive.com said aluminium is one of five products expected to be in tight supply this year.

Foreign trade people should pay attention to the fact that in the short term, the prices of raw materials such as aluminum, copper, and steel plates are difficult to fall. Please pay attention to the risk of rising raw material costs and update the quotation in time!