The price of aluminum remains high, after hitting a near 14-year high last week.
The price of aluminum reached US$3,266 per tonne on the London Metals Market (LME) last Wednesday, approaching the record high of $3,317 reached on July 11, 2008.
The price of aluminum then declined until reaching $3136 at the end of the week, before resuming higher on Monday and closing at $3214.
This increase is mainly explained by measures affecting aluminum production and the supply chain in China, which is one of the world’s largest aluminum producers.
A lockdown imposed due to COVID-19 cases early last week in the Chinese city of Baise, in a region with significant aluminum production, has created pressure on markets.
Added to this are the pollution reduction measures during the Olympic Games, which also affect the production of Chinese factories powered by fossil fuels, explains Marc-Antoine Dumont, economist at Desjardins.
In the background, geopolitical tensions between Russia, a major global aluminum producer, and Ukraine are fueling market concerns, while rising gas and oil prices are hurting the productivity of European aluminum smelters.
So we have several factors that limit a production that is already very limited, in the market, so that’s why we see big price movements“, he added.
© GLEB GARANICH/Archyde.com
Tensions between Russia, a major global aluminum producer, and Ukraine are fueling market concerns. Here, a Ukrainian soldier on the front line in the government-held town of Avdiyikva in the Donetsk region, partly in the hands of pro-Russian separatists.
A demand that should decrease
Demand for aluminum has remained strong since the recovery following the first wave lockdown. The price of aluminum continued its upward trend, reaching above $3,100 per ton this fall, before falling in a short time.
However, it quickly experienced rapid growth since the beginning of the year, until it regained and exceeded the fall peak.
Marc-Antoine Dumont, however, expects demand to fade in the second half of the year, as the effect of temporary restrictive measureson production is expected to decline.
It won’t go away, but as the year progresses, consumption will shift somewhat quietly towards services, he argued. That should help demand a bit. But what will especially help prices is when the supply will rebalance.»
Difficult to assess the impact on investments
According to the economist, it remains difficult to assess the impact that this new increase in the price of aluminum will have on investment projects in Saguenay-Lac-Saint-Jean.
When prices rise in global markets, prices tend to follow at a more regional level. So that’s an element that can affect investment, but beyond that, it’s really more factors that are focused on the region and on the issues of the projects that we see here“said Marc-Antoine Dumont.
The impact of the rise in the price of aluminum in 2021 on Rio Tinto, which has five aluminum smelters and an alumina refinery in Saguenay-Lac-Saint-Jean, will be known on February 23, when the multinational will unveil its annual results. .
© Gilles Munger/Radio-Canada
Federal, provincial and municipal elected officials were on hand for Rio Tinto’s announcement last November. Here they surround representatives of the multinational.
During the rapid rise in the price of aluminum at the start of the fall, several regional players had called for investments from the Anglo-Australian group.
In November, Rio Tinto announced an investment of $110 million for the addition of 16 new tanks to its AP60 plantlocated in the Jonquière Complex, in Arvida.