LONDON/SHANGHAI (Feb 8): Aluminium neared a 13-year high as Goldman Sachs Group Inc predicted even higher prices with supply disruptions from China to Europe further tightening the market.
The US bank raised its 12-month target to a record US$4,000 a ton as power rationing hits supplies from China and Europe at a time of "exceptional" developed-market demand. The global aluminium market is in the widest backwardation since 2018, and prices have risen over 10% in London this year.
"Aluminium markets are facing a melt-up in prices this year, driven by simultaneous deficits in both China and ex-China drawing on already low stock of inventory," Goldman analysts including Nicholas Snowdon wrote.
The aluminium market in southern China tightened recently with a smelter in Baise city, Guangxi province facing risks of disruption after a Covid-19 infection was detected, researcher Shanghai Metals Market (SMM) said. A resurgence in cases has already disrupted local metal transportation.
In addition to that, up to 15 million tons of alumina capacity in Shanxi, Shandong, and Henan provinces have also been curtailed during the Winter Olympics, SMM said. That is on top of ongoing production losses at European smelters, which are battling record fuel costs.
Aluminium rose as much as 2.3% to US$3,205 a ton, before trading at US$3,183 by 11.30am on the London Metal Exchange. That is near an October peak of US$3,229, which was the highest since 2008.
Prices have advanced along with other commodities, which have been hit by production shortages worldwide. Markets are "out of everything", including oil, gas, coal, aluminium, and copper, forcing them to price in shortages, said Jeff Currie, head of commodities research at Goldman Sachs. The Bloomberg Commodity Spot Index, which tracks 23 energy, metals, and crop futures, touched a record this year.
United Co Rusal International PJSC is forecasting a global aluminium deficit of as much as 1.7 million tons this year, according to BCS Global Markets. Morgan Stanley expected that to reach one million tons after power-related supply curtailments in Europe. Goldman projected a deficit of 2.2 million tons this year and 1.8 million tons in 2023.
Other base metals were mixed on Tuesday, with copper down 0.7%, nickel also falling, and zinc trading little changed.