Japan’s fifth-biggest trading company, Marubeni, announced on 7 Dec’21 that there will be a global supply shortage of 1.4 million tonnes (mn t) of aluminum in CY’22. It is expected that the supply shortage of aluminium may increase for the second consecutive year by 1.04 mn t from 2009, according to SteelDaily.
Demand and supply
Global demand of aluminium is expected to increase 2.9% y-o-y to 69.12 mn t, while supply is expected to increase 1.3% y-o-y to 67.7 mn t.
Demand in the transportation equipment industry was sluggish owing to a shortage of semiconductors and components due to the spread of the new coronavirus infection in South East Asia.
In addition, usage of aluminum in beverage containers is expected to grow, supported by trends in deplasticisation and reduction of carbon dioxide emissions.
Demand for China alone, which accounts for 60% of production and consumption of aluminium, has increased by 2% to 40.5 mn t, while supply decreased by 0.5% to 38.0 mn t.
Although, the construction and expansion of smelters with reduced hydroelectric power generation has progressed mainly in Yunnan province, it is still grappling with the problem of power shortages. The government has put forth several measures to curb coal prices. Meanwhile, electricity shortages are expected to continue to lead to production cuts.
Prices
It is expected that there will be no concern about production cuts due to the production cost of aluminum falling to the current price levels. The current average cost of aluminium hovers at around $1,850/t worldwide. Even in smelters that were not profitable, currently production is increasing due to the cancellation of production cuts and the increase in electricity supply.
Also, the price of aluminum bullion in CY’22 is expected to be $2,500-3,200/t for the London Metal Exchange (LME) 3-month futures price. The premium to Japan is expected to be $140-250/t.
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