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Aluminum notches fresh 13-year high on supply woes

Demand surge.
Image: Bloomberg

Aluminum extended its stunning yearlong rally to the highest since 2008 as supply concerns in China and Guinea tightened the market.

A coup in the African country, which supplies almost a quarter of the world’s bauxite, has fueled concerns about potential supply disruptions to the material key to aluminum production. That’s even as Guinea’s new leaders urged mining companies to keep operating and reassured them that their existing agreements with the state will be honoured.

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The worries over bauxite come amid aluminum supply constraints in China driven by campaigns to conserve power and crack down on pollution from the energy-intensive industry. Those environmental goals could be reassessed, however, after a surge in Chinese producer price inflation to a 13-year high highlighted the need to intensify efforts to curb raw material prices.

With supply chains restricted “and the real risks that they might break, any additional risk to supply is really spooking the market,” Fiona Boal, head of commodities at S&P Dow Jones Indices, said in an interview with Bloomberg TV. “It’s largely a supply story for now.”

Aluminum rose as much as 1.6% to $2 837.50 a metric ton on the London Metal Exchange, the highest since 2008, before trading at $2 829 as of 12:48 p.m. Shanghai time. In Shanghai, the metal climbed 2.1% to the highest since 2006.

Aluminum has almost doubled since its trough last year as businesses worldwide reopened from pandemic shutdowns and consumer demand and economic activity rebounded. Goldman Sachs Group Inc., Citigroup Inc. and Trafigura Group are among those forecasting further gains ahead, as the industry braces for a potentially seismic shift into deepening deficits.

© 2021 Bloomberg

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