Aluminum prices hit 13-year high on supply tightness, concerns

Aluminum prices have reached a 13-year high, due to supply tightness caused by production curtailments and closures in Europe due to high energy costs, as well as issues in China and uncertainty over possible sanctions on Russia

The LME aluminum cash price closed at $3,247 per tonne on 9 February 2022, the highest level since July 2008 and also up 15.3% since the start of 2022.

Aluminium production is energy intensive and energy costs globally account for over one-third of production costs on average. Rallying power prices in Europe had created a hostile environment for aluminum smelters by raising costs significantly, which had led to production cuts or shutdowns in France, Germany, Spain, Netherlands, Montenegro, Romania and Slovakia,

The most recent hit to European supply was the Slovalco aluminum smelter in Slovakia which is majority-owned by Norsk Hydro. Slovalco Aluminium said that it would be cutting production at the smelter to around 60% due to high energy and carbon prices.

Previous closures in Europe include aluminum group Alcoa, which temporarily curtailed its San Ciprian smelter in Spain on Jan. 1 for two years until January 2024 due to ongoing challenges from high energy prices.

Romanian smelter Alro has also announced a planned 2022 reduction of primary aluminum by 60% by running only two out of its five electrolysis halls. But it said in late January that it hoped to resume electrolytic aluminum production to previous levels in 2023, depending on energy prices.

The Dunkirk smelter in France also lowered production of aluminum by 15% in January, while Trimet previously cut output at its Essen, Hamburg and Voerde smelters in Germany by 30%.

Dutch aluminum producer Aldel halted production of primary aluminum at its Delfzijl plant in October, Talum cut output from its smelter in Slovenia in November and in Montenegro, Uniprom’s KAP smelter has also reduced output.

Besides the high European energy prices causing producers to cut supply, other drivers have also been at play. Europe’s alumina costs — about 25% of total cost of metal production — have lifted 30% on bauxite supply risk. China also remained a main driver of the price increases, A positive local demand growth, and slowing local supply production have added to the price increase.

Leave a Reply

Your email address will not be published.