Aluminium prices are trading at a new 10-year high, at around USD 2,770 per tonne. The prices have gained by nearly 40 percent this year and the major cues seems to be coming from China because production capacity is being cut. There are power concerns related to climate change as well. So nearly 2.35 million tonne of capacity in China as of now is idled.
The markets are also are looking at a lot of support from the political unrest in Guinea, which led to supply shortages in bauxite, which is a major raw material for aluminium.
A few numbers to look at:
The Chinese aluminium imports, markets thought last year, it was perhaps just a one-off, but between January and July this year, we already have seen 1.5 million tonne of an import in China. This is over and above 2 million tonne of aluminium import that China has done in overall last year as well.
There is an interesting report from Macquarie, which has put out production estimates which says that in this current year, there could be a supply deficit of 700,000 tonne and by 2025 it’s going to be a deficit every year; by 2025, aluminium could be in a deficit of 2 million tonne.
Macquarie also has put out the global demand where it says that this year the demand is expected to increase by 8 percent and by 2025 it will be 10 percent higher than what we would see in this year.
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The final numbers are on the aluminium cost of production. As of now, aluminium prices are at USD 2,800 per tonne. Macquarie says that the global cost of production is USD 2,100 tonne. Wood Mackenzie puts it at USD 1,950. So, with the kind of profits that the smelters are making right now there are expectations that more projects could come online in the next couple of years.
Watch the accompanying video of CNBC-TV18’s Manisha Gupta for more details