Aluminium has been a stark outperformer in the metal pack. While prices of most metals have gone up, aluminium is trading at a three-year high for LME prices and a decade-high for Shanghai prices. In the last week itself, the metal witnessed 3 percent gains and now stands tall with nearly 35 percent gain this year.
Here is why aluminium prices are rising
One, there has been a subsiding supply-side bottleneck in China, which is the largest primary aluminium producer. Some of the concerns that have impacted China’s production include emission rules, power shortages, and floods in July.
Two, China started importing aluminium in the middle quarter of last year and since then, the imports have just about continued. For the month of June, the imports were 158,000 tonnes and in the first half of this year, there have been nearly 750,000 tonnes of imports in China alone.
Therefore, markets anticipate a stronger than expected demand for 2021, so much so that this year could end in a deficit. There has also been a strong increase in demand with the metal being used in decarbonising the solar photovoltaic, lighter vehicles, packaging - all of these have supported aluminium prices. So, the markets believe that going up from here, one could be looking at higher aluminium prices.
A Credit Suisse report suggests an increase in aluminium prices to $2670 per tonne whereas a Bank of America report suggests that the metal shall be priced at $3,000 per tonne before this year ends.