Regional aluminium costs diverge as U.S. demand strengthens

　　Benchmark aluminium on the London Metal Exchange was trading around $2,617 a tonne on Monday, significantly off a record high of $4,073.5 hit last March after Russia’s invasion of Ukraine raised supply worries.

　　In the physical market, buyers also pay a premium over the benchmark price which typically covers transport and handling costs and taxes.

　　In Japan, buyers were offered premiums of $95-$105 per tonne for January-March primary metal shipments, down 4% to up 6% from the final quarter of 2022. PREM-ALUM-JP

　　The European duty-paid premium at $279 a tonne is broadly in line with $281 at the start of the year, while in the United States it is trading at $595 a tonne, up nearly 15% since the start of January.

　　“A potential demand driver for aluminium this year is the United States... it seems to be very active at the moment,” said Liberum analyst Tom Price. “Everyone was worried about Europe’s aluminum production collapsing because they had energy issues, but all they did was import it from China, which had a surplus,” Price added. “We still have a global surplus.”

　　Liberum expects global production of 69.6 million tonnes this year, giving rise to an 80,000-tonne surplus, down from 110,000 tonnes in 2022.

　　Output in China, which accounts for nearly 60% of global supplies, jumped to a record high last year boosted by newly launched capacity and a relaxation of power supply restrictions, despite production cuts in some provinces where drought led to shortages of hydro-power.

　　In contrast to Liberum’s Price, Edward Gardner, an analyst at Capital Economics, expects a global aluminium market deficit of 843,000 tonnes this year from an estimated deficit of around 400,000 tonnes in 2022.

　　“It’s not until advanced economies start to recover in the second half of the year, and China’s recovery becomes more established, that we expect aluminium prices to start a sustained upward trajectory,” Gardner said.