The price of aluminium gained significantly at the beginning of the week

The price of aluminium gained significantly at the beginning of the week after reports from industry circles suggested that aluminium production in China would have to be cut significantly over the next few months due to power rationing. The estimates of the latest production cuts concern annual capacities of 700 thousand tonnes. Since September, capacities of around 1 million tonnes have already been affected. According to the data provider MySteel, the affected smelters have had to reduce their electricity consumption by 40% since autumn.

The Yunnan region, which accounts for an estimated 12% of China's total aluminium production, is particularly affected. Against this backdrop, it seems increasingly unlikely that production this year can be increased as strongly as last year. Last year, according to data from the International Aluminium Institute (IAI), aluminium production in China reached a record high of 40 million tonnes, a 4% increase over the previous year. However, the increases occurred mainly in the first half of the year. Since the summer, production has more or less stagnated, which is probably due to electricity rationing. According to the latest IAI data, global production was down 0.6% in January compared to the previous month, with China contributing significantly to the decline with a drop of 1%. But production in Europe also fell by 1%, suggesting that European industry is still struggling with low profit margins despite the fall in energy prices. Against this backdrop, arguably tighter supply combined with a pick-up in demand in top consumer China following the end of the Corona restrictions is likely to push the aluminium price up to US$2,800 per tonne by the end of the year, in our view.

Source: Commerzbank Research, Photo: Fotolia