February 15, 2022

Record high for Aluminium, shortages send prices soaring

February 15, 2022

aluminium is the jack-of-all-trades of the metal industry
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Record high for Aluminium, shortages send prices soaring 

 From cans of your favourite soft drink to vehicles and more, aluminium is the jack-of-all-trades of the metal industry. 

aluminium is the jack-of-all-trades of the metal industry  

It is hard to get excited about the aluminium market; the commodity isn’t as rare as platinum and doesn’t have the same popularity in the market as other industrial metals such as gold or silver. 

All this is set to change, however, as dwindling stockpiles have pushed the price of the common metal sky-high. 

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Today we look at the aluminium trade, what’s pushing it to record highs and share valuable advice for all traders. 

Ukraine jitters cause scarcity 

 The price of aluminium climbed towards multi-year highs on February 14 as escalating fears of a Russian invasion of Ukraine could exacerbate existing shortages. 

A Russian invasion of Ukraine could mean sanctions against Russian companies such as Rusal, which produces 5% of the global aluminium supply.  

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Aluminium on the London Metal Exchange (LME) was up 2.4% at $3212 a ton, down from an earlier high of $3241. Earlier in February, aluminium prices hit $3,333, close to the record high of $3,380.15 in July 2008. 

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Another driving factor behind the price rise is stocks, at 868,950 tons globally, have more than halved since March 2021. 

 Electricity to blame 

It’s easy not to get excited by Aluminium, after all, it’s just dirt; bauxite, one of the most abundant elements on Earth, is charged with electricity to create it.  

The main issue is electricity; turning bauxite into pure metal is an incredibly energy-intensive process. Producing a ton of aluminium uses the same electricity as an average US family consumes in a year. It’s prohibitively expensive for most countries to produce that’s why its primary produces were located in Canada and Siberia due to abundant hydropower and geothermal energy. 

China however has become the preferred producer with 58% of the global production share, due to its cheap yet abundant coal-fired power stations, at the cost of polluting the planet. 

The climate change revolution has resulted in China and many countries around the world shutting down “dirty energy” plants. Unless global production capacity increases eventually the market will have to force demand down. A reality that some analysts believe could occur by 2024. 

In 2014, stocks of the metal peaked at almost 5.5 million tons; In February 2022, they have dropped below 800,000 tons. 

How will this affect the market? 

 The ubiquity of aluminium in modern life means that it’s everywhere, and in everything; very few industries won’t be affected by the reduction in aluminium adding to global inflationary pressures. 

From cars to electronics, all production hinges to a large degree on aluminium. The lack of the commodity will affect how much consumers will have to pay for a specific product. 

For now, until a workable solution is found, traders are enjoying the metal’s bullish run. 

 

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Disclaimer
Trading involves a significant risk of loss and is not suitable for all investors. It’s important to understand the risks and seek advice from an independent financial advisor if necessary.

The information provided here does not constitute investment advice.

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