ANZ Bank said on Friday that the aluminum market is expected to outperform other base metals, as continuous supply problems caused by rising geopolitical risks in major producing countries such as Russia are expected to support the aluminum market, while demand shows signs of improvement.
According to the Zhitong Finance APP, ANZ Bank said on Friday that the performance of the aluminum market is expected to outperform other base metals, as continuous supply problems caused by rising geopolitical risks in major producing countries such as Russia are expected to support the aluminum market, while demand shows signs of improvement.
ANZ Bank analysts Daniel Hynes and Soni Kumari said in a report that global alumina supply losses have exceeded 2 million tons so far this year, leading to a market shortfall of 470,000 tons in another year of 2024. The report said that although supply tensions may ease in the second half of 2024 and 2025, the shortage of supply background will keep alumina prices high, accounting for 25-30% of the total production cost of aluminum.
Aluminum futures rose for the third consecutive month in May, up more than 10% so far this year.
The brokerage said that alumina supply is increasingly affected by energy issues, especially the decline of hydropower generation restricted production. The company also said that supply interruptions have increased recently, and several refineries in Australia, India, and China are operating under reduced production.
ANZ Bank said on the other hand, investments in the grid and the growth of electric vehicle production are benefiting aluminum demand, which has pushed aluminum prices to the highest level since June 2022 at $ 2,700 per tonne.
"The impact of some supply problems may be temporary, but the combination of rising production costs, sustained geopolitical risks, and strong demand creates a strong foundation for the foreseeable future."
Alcoa has cut production at its Kwinana alumina refinery in Western Australia, one of three in the region; while Rio Tinto has announced that due to a natural gas supply shortage, its alumina cargo at the Queensland refinery will face force majeure.
Meanwhile, Aluminum Corporation of China (Chalco) is also facing various unfavorable factors, with tight supply in the bauxite market making it difficult for alumina refineries to obtain raw materials. The bank believes that high natural gas prices have also affected refinery operations.