Riding High
April 2021
Despite reports China is planning to release up to 0.5Mt of state reserve stocks, the aluminium price is expected to continue its positive start to the year in the June quarter.

AME is forecasting the aluminium price to remain firmly above the US$2,000/t mark through the June Quarter to average $2,200/t. Robust demand for aluminium, particularly from China, saw the price only dip slightly below US$2,000/t on a few occasions for the March Quarter average of US$2,099/t.

Prices are forecast to remain at current levels for the remainder of the first half but to retreat slightly over the December half with Chinese stimulus tapering. Pickup in demand elsewhere is not anticipated to offset any tapering of China’s demand. A build-up of stocks from 2020 can also place an effective price ceiling. However, protectionist measures as countries look to reinforce their domestic industry is anticipated to be a theme which could elevate a price floor in the short to medium term.

AME’s full year price forecast has been lifted from US$2,065/t to US$2,115/t for 2021 with high prices in the March Quarter carrying strongly into the second. AME’s Europe aluminium price rose erratically over March, with reports of China’s potential reserve release causing late volatility. The price averaged US$2,199/t over the month. It had risen 2.2%, finishing at US$2,211/t.

In mid-March the International Aluminium Institute (IAI), global representative of the aluminium industry, has published a pathway for the industry to reduce emissions by up to 80% by 2050. Achieving the target will help the industry meet internationally agreed climate goals as well as meet primary metal demand which is expected to increase by up to 40% and triple recycled aluminium from end-of-life sources over the period.

The IAI report accepts that reducing emissions while meeting the increasing demand will require huge investment in production technologies and commitment along the entire value chain. The first pathway targets the emissions from electricity production—through decarbonisation and carbon capture storage—of which an estimated two thirds comes from captive sources. The second is the reduction in direct emissions, both in fuel combustion and reduction of anodes. The third pathway is improving recycling and resource efficiency.

Mitsubishi is re-entering the bauxite sector after making a deal with Glencore to buy a 30% stake in the Aurukun project on Cape York in Queensland, Australia. The Aurukun Bauxite project is an undeveloped deposit which Glencore won a bid to evaluate the feasibility of in 2015. A mine producing 8Mtpa of washed and screened bauxite would have a mine life of over 20 years at the site. Mitsubishi has stated a final investment decision on mine development will be made next year.

The Aluminium Corporation of China (Chalco), one of the largest producers in the world, has released its financial results for 2020. Despite a surging aluminium price in the second half of the year, the company posted the lowest annual profit since 2016. Chalco’s net income was CNY761m (US$117m), down 13.1% year on year, from CNY186bn (US$28.5bn) in revenue, which was down 2.2%. The comparatively low profit is due to significant impairment charges booked by the company attributed to the pandemic and its impact on both production and broader operations. Chalco produced 3.69Mt of aluminium from its smelters, making it the third largest global producer for 2020.