Aluminium Price Slump: Is the Bottom in Sight?

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Hey there, aluminum enthusiasts! Rina Meng here, your go-to gal for all things aluminum. Today, I’ve got some exciting news to share with you. Brace yourselves because we might just be witnessing the end of the aluminum price slump! That’s right, folks. The future is looking bright for this shiny metal as clean energy demand continues to soar. Let’s dive into the details and explore what’s been going on in the world of aluminum.

Now, before we get into the nitty-gritty, let me paint you a picture. Imagine a world where aluminum prices are soaring higher than a rocket ship blasting off into space. Well, that’s precisely what we experienced last year. However, like any good roller coaster ride, what goes up must come down. And boy, did aluminum prices come down! We’re talking about a nearly 20% drop since January and a whopping 40% plunge from last year’s highs. Ouch!

So, what caused this dramatic downturn? Well, it’s a combination of factors, my friends. Economic weakness in Europe and the US, along with lackluster construction demand in China, dealt a heavy blow to the aluminum market. But fear not! There’s a silver lining (or should I say aluminum lining?) to this story.

Here’s where things get interesting. Despite the current slump, many experts, including traders, producers, and analysts, are feeling pretty bullish about the future of aluminum. Why, you ask? Well, it all comes down to the ever-growing demand for clean technologies. Think electric vehicles and solar panels. These babies are hungry for aluminum, and they’re not slowing down anytime soon.

In fact, the recent contango in aluminum prices has got everyone buzzing. For those not in the know, contango refers to a situation where the price of a commodity in the future is higher than the current price. It’s like buying a ticket to a concert now at a discounted price, knowing that the show will be a hit in the future. The same principle applies here. The weak spot demand and the expectation of higher future prices are creating a sense of optimism among aluminum enthusiasts.

Colin Hamilton, the ever-optimistic analyst at BMO, believes that we might be nearing the bottom of the price cycle for aluminum. That’s music to our ears! If demand keeps improving, we might just leave this price nadir in the dust and start climbing back up in 2023. Fingers crossed, my fellow aluminum aficionados!

Now, let’s talk numbers. Currently, the benchmark three-month future contract on the London Metal Exchange is hovering around $2170 per tonne. That’s quite a drop from the dizzying heights of over $3,840 per tonne we saw last year. But fear not, my friends! One trader, who happens to be the wisest owl in the trading house, predicts that prices will bottom out at around $100-$150 below their current levels. And from there, it’s onward and upward!

Aluminum is the unsung hero of various industries, my friends. It’s the backbone of buildings, the trusty companion of beverage cans, the shining star in solar panels, and the sturdy frame of automobiles and airplanes. You name it; aluminum’s got it covered. That’s why it’s often seen as a barometer for industrial activity. And right now, we’re experiencing a cool-down in the global economy, which directly affects the demand for aluminum products. Pål Kildemo, the chief financial officer at Norsk Hydro, puts it perfectly when he says, “We are having a cool-down of the economy, and aluminum products are very closely linked to GDP across the globe.” It’s like aluminum is whispering secrets about the economy in our ears!

Now, let’s address the elephant in the room. Europe seems to be driving the weakness in demand. Come on, Europe, we need you to pick up the pace! Norsk Hydro, the fourth-largest aluminum producer outside of China, has even pushed back its forecast for a demand recovery. They now expect it to happen in the first quarter of 2024, at the earliest. But hey, setbacks happen, and it’s all part of the aluminum roller coaster ride.

Consultancy Cru has also chimed in, lowering its global consumption forecast for this year and the next. They believe that prices still have some room to fall. And let’s not forget about the major banks that have slashed their price forecasts recently. It seems like everyone’s a bit cautious, but hey, that’s what makes this journey exciting, right?

In closing, my fellow aluminum enthusiasts, the future of aluminum is looking brighter than ever. The slump in prices might just be nearing its end, and we can expect a rebound fueled by the growing demand for clean energy technologies. So, buckle up and get ready for the aluminum roller coaster ride of a lifetime! Remember, my friends, in the world of aluminum, there’s never a dull moment. Stay shiny, stay positive, and keep rocking the aluminum world!

Thanks for joining me on this aluminum adventure. Until next time, keep calm and aluminum on!

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