Recently, aluminum prices have surged in the global market, reaching a near two-year high. This increase is primarily driven by supply concerns. Global mining giant Rio Tinto has announced a force majeure event on third-party contracts at its alumina refinery in Queensland, Australia, further pushing aluminum prices up.
It is understood that Rio Tinto’s alumina refinery has been severely impacted by gas supply restrictions, leading to an inability to fulfill alumina export contracts to third parties on schedule. Since an incident occurred in early March this year on the Queensland gas pipeline, the gas supply to Rio Tinto’s Gladstone facility has been significantly affected. The company stated that it is assessing the impact of the Queensland fire on the gas pipeline supplying the refinery, but normal levels of supply are not expected to resume until at least the second half of 2024.
Edward Meir, an advisor at Marex, commented, “Aluminum often lags behind copper when base metals rally significantly, but fund money will eventually catch on.” He further pointed out that due to Rio Tinto’s supply issues, other alumina producers may struggle to quickly fill this gap, potentially leading to further increases in alumina and aluminum prices in the coming days.
Although there is no shortage of bauxite supply, indicating sufficient raw material for alumina, bottlenecks in the production process and supply chain issues continue to limit the supply of alumina. This imbalance between supply and demand provides strong support for the rise in aluminum prices.
The surge in aluminum prices has far-reaching impacts on various segments of the global aluminum supply chain. For aluminum producers, higher prices undoubtedly bring higher profits, but they also face rising production costs and supply chain instability.
For downstream users of aluminum, higher prices may increase production costs, affecting the competitiveness of their products. Therefore, they need to closely monitor aluminum price trends and develop reasonable procurement plans to cope with potential cost increases.
Looking ahead, the trend in aluminum prices will be influenced by various factors. On one hand, global economic recovery and accelerated infrastructure construction may drive an increase in aluminum demand. On the other hand, supply shortages and rising production costs may continue to support aluminum prices.