With the ongoing global economic recovery, the aluminum market is facing unprecedented challenges. The increase in global aluminum production this year is primarily attributed to European smelters resuming production after electricity prices stabilized and Chinese Yunnan province resuming production after the relaxation of hydroelectric restrictions. Despite robust demand in the green sector, weakened consumption in traditional demand areas is limiting the upside potential of aluminum prices, leading to expectations of market surplus.
According to analysts’ projections, the market is expected to experience surpluses of 338,000 tons and 250,000 tons in 2023 and 2024, respectively. This shift from an expected shortage to surplus is having a direct impact on aluminum prices. Natalie Scott-Gray from StoneX in London stated, “Ample supply, especially against the backdrop of idle capacity coming back online in Europe, will limit the upside for aluminum.”
For the outlook on aluminum prices, the average LME spot aluminum price in 2024 is expected to be $2,350 per ton, a 5% increase from current prices. However, the average spot aluminum price for 2023 is projected to be $2,270 per ton, lower than the $2,707 per ton in 2022. These price fluctuations will directly impact the global economy, especially industries and construction sectors that rely heavily on aluminum.
This surplus in supply not only reflects a shift in the supply-demand dynamics of the aluminum market but also underscores the uncertainty in the global economic situation. While demand remains strong in certain sectors, the softness in others and the recovery in the supply side have altered market prospects. This will have a direct impact on metal prices and profound implications for the global economy.