Can Aluminium stage a demand recovery soon?
Team Veye | 23-Oct-2022
Metal markets have been falling sharply this year because of rising inflation. In their bid to tackle it, central banks turned hawkish globally and responded with interest rate hikes, further eroding demand for both precious and industrial goods.
Added to this is the continuing Russian crisis, which has already been a cause of many discrepancies worldwide. Because of Russian restrictions, Europe is seeing a good surge in energy prices. It has shown little self-sufficiency regarding energy resources over the past few weeks and in the short and medium term, wind, solar, and water energy cannot meet the energy demand.
With the Russian gas disruptions, Europe is on the verge of losing its primary aluminium products line and the aluminium recycling units, resulting in the aluminium smelters slashing production, which are big customers for secondary non-ferrous metals.
Aluminium prices have been quite unstable for the last couple of years. At the time of covid and resulting restrictions, its prices had plunged to multi-year lows due to a weak industrial demand. Increased economic activities in 2021, led the demand for industrial commodities and its price rebounded.
During the first quarter of 2022, prices hit an all-time high of $4073.5 a tonne on the LME, because of supply concerns followed by geopolitical uncertainties. But prices have currently shed more than 47 per cent from its all-time high due to negative fundamentals.
The silver lining, however, is that in the search for sustainability, big brands are preferring aluminium over other materials in making their products. Apple will use a high-end combination of textiles, aluminium, and glass to design the company’s latest Virtual Reality headset, allowing iris scanning for biometric payments with log-ins. Recently, the first Indian-manufactured aluminium goods train rake was flagged off from Bhubaneswar in Odisha, India. Apart from being lighter than its predecessors, it is also more capable of carrying freight.
Global aluminium demand is forecast to grow by 1.1% in 2022, driven by growth in the transportation, electrical and packaging sectors. Aluminium can see its demand rising for solar panels, as well as replacing existing copper cabling for power distribution. Overall, the electric sector will require an additional 5.2 Mt by 2030. This could be further boosted by the construction sector requirement of an additional 4.6Mt by the end of the decade. In the longer term, aluminium demand is expected to increase further in a decarbonising world, mainly due to its lightweight properties and infinite recyclability.
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