High surplus on the aluminium market despite recovery in demand

After the aluminium price crossed the important 200-day line last week, it continues to rise. This morning it rose to USD 1,730 per tonne, the highest level since the beginning of March. According to data from one of the largest aluminium producers, the global aluminium market showed a supply surplus of 1.8 million tonnes in the first half of 2020. This represents a 1.8% year-on-year increase in production, mainly driven by China. In contrast, demand fell by 6.6%. China prevented an even sharper decline (demand was stable there). The producer outside China puts this at -15.4%. However, the worst is now over and there are signs of a recovery in demand in Europe and the USA. However, it will probably be quite some time before demand returns to its pre-crisis level.

Despite the recovery in demand, the surplus already accumulated is expected to increase this year to 2.5 million tonnes. Other market participants are still expecting significantly higher surpluses in some cases. China recently took advantage of a rare arbitrage opportunity and imported a large quantity of aluminium in June. According to customs data, almost 290 thousand tonnes of aluminium were imported, the highest monthly figure in eleven years. In the second quarter, the price of aluminium on the SHFE in Shanghai rose by 19.4% (converted into USD), while its counterpart on the LME in London rose by only 6.1%. This has made buying aluminium abroad attractive for Chinese traders. In China, aluminium demand had already recovered from the corona shock in the second quarter, but outside China it was still at rock bottom.

Source: Commerzbank Research, Photo: Fotolia