LMonday, March 7, aluminum was white-hot with speculation. For the first time, the light metal crossed the bar of 4,000 dollars (3,800 euros) per ton, on the London Metal Exchange, in London. A historic threshold crossing, breaking the previous record dating from 2008. Premium price for aluminium.
Nearly four months later, while summer temperatures have exploded the meters, it’s time for refreshment on the financial markets. It is currently trading at less than $2,500 per ton. A price certainly high, but clearly down from its peak. Comparable, in fact, to that achieved a year earlier.
The armed invasion of Ukraine by Russian forces commanded by Vladimir Putin has caused commodity prices to soar. Wheat, corn, rapeseed, sunflower, but also metals and energy were drawn into an unprecedented upward spiral. White metal has not escaped this maelstrom. Beginning its upward journey with the first sounds of Russian boots, the aluminum reached a paroxysmal level when the two armies crossed swords.
Strengthening of the greenback
By lighting the fuse in the Ukrainian powder keg, Mr. Putin propelled the price of gas to a stratospheric course. In this context, some very energy-intensive European foundries had been put on hold. Chinese sites were also idling, while the government wanted at all costs to reduce polluting emissions. Some also weighed the risks related to the weight of Russia, the world’s second largest aluminum producer behind China, and were counting on an aluminum market in deficit in 2022. What to justify, according to the bank Goldman Sachs, a price of 4,000 euros per ton.
Since then, the weathervanes of prediction seem to have changed course. Light metal stocks weigh heavier than expected. The World Bureau of Metals Statistics estimated the global aluminum market surplus at 400,000 tonnes, over the period January to April. China has gone around. The media curtain of the Winter Games having fallen, the demand for an Olympian blue sky has, it is true, lost its topicality. The foundries therefore restarted the production and export machine. Enough to compensate for any air pockets on the Russian side.
The question of the dynamics of demand also arises. This metal with multiple industrial uses, from coffee capsules to cans and airplane cabins, has benefited from the post-Covid-19 recovery. It also plays a key role in the electricity networks that are supposed to become denser to meet environmental challenges. But the return of inflation, rising interest rates and repeated lockdowns in China due to Covid-19 could weigh on global economic growth. The strengthening greenback is also fueling the bearish trend in commodities. Aluminium, the downturn is looming…