A squeezed global aluminum supply chain has sent the price of the metal’s critical ingredient, alumina, to the brink of a new record high on Wednseday of $707.59 a ton, nearly eclipsing the 2018 high of $707.75.
Since the mid-point of the year, supply chain snarls and production disruptions in major alumina-exporting countries have sparked shortages. Countries critical to the aluminum supply chain include Guinea, Australia and China.
Mounting supply chain woes from the West African country of Guinea, a top source of seaborne-traded bauxite that supplies over 70% of China’s imports, come amid continued trade disputes with local government customs officials.
Meanwhile, Australia, another large producer of bauxite and alumina, has seen exports move lower on climate change policies and sliding natural gas supplies.
“There are no signs of a turnaround in spot alumina prices within this year,” Gao Yin, an analyst with consultant Horizon Insights, said who was quoted by Bloomberg, adding that aluminum inventories at Chinese smelters have been declining, but “the market hasn’t considered output cuts as a base-case scenario yet.”
Data from Fastmarkets shows alumina prices are back to near-record highs of around $707 a ton.
Earlier this week, UBS Dominic Schnider told clients that increasing supply chain concerns surrounding “bauxite and alumina” and another round of Chinese stimulus “have provided underlying support for higher aluminum prices.”
Schnider said, “Supply challenges on the bauxite and alumina side (site closure, force majeure, and export blockages) from Australia to Guinea are likely to be a key issue into the year-end.”
Morgan Stanley recently told clients that stresses were materializing in the global aluminum supply chain, with China facing challenges in alumina and bauxite supply.
Just imagine what happens to aluminum markets if and when China fires the mega bazooka stimulus package…
Tyler Durden
Fri, 11/01/2024 – 04:15
