Aluminium inventories in London Metal Exchange (LME)-registered warehouses are near their lowest level in 17 years.
LME aluminium inventories are likely to fall further in the coming days and weeks as more aluminium will leave LME warehouses and be shipped to Europe, where supplies are in short supply.
In Europe, record-high electricity prices have pushed up the cost of producing metals, especially power-intensive aluminium. Western Europe accounts for about 10% of global aluminum consumption of 70 million tons.
Citibank commodities analyst Max? Layton noted in a research note that supply risks to aluminum remain high. About 1.5 million to 2 million tonnes of aluminium capacity in Europe and Russia are at risk of closure in the next 3 to 12 months.
Supply shortages in Europe have led to the withdrawal of LME aluminium stocks. LME aluminium inventories have fallen 72% since March last year to 532,500 tonnes, the lowest since November 2005. Even more worrying is that only 260,075 tons of aluminum inventories are available for the market, a record low.
ING analysts pointed out that aluminum futures on the LME extended Friday’s gains on Monday as the number of aluminum warehouse receipts fell to an all-time low, reflecting the tight supply situation in aluminum markets outside China. In China, supply growth outpaced demand, as demand weakened due to the outbreak. China’s primary aluminium production hit a record high of 3.36 million tonnes in April, as previously imposed power restrictions eased, allowing Chinese smelters to ramp up production.
Benchmark three-month aluminium on the LME rose 1.2% to $2,822 a tonne after hitting a one-week high of $2,865 in early trade.
The discount of LME three-month aluminum to spot-month aluminum has narrowed to $26.5 a tonne from $36 a week ago, amid concerns about tight LME aluminum inventories.
In Europe, consumers are paying a premium of up to $615 a tonne for their spot aluminium, which is also an all-time high.
Post time: May-27-2022