An Estimated 1.5 To 2 Million Tonnes Of Aluminium Capacity in Europe And Russia Are At Risk Of Closure in The Future

Aluminium stocks in LME warehouses are already at their lowest level in almost 17 years and are likely to fall further in the coming days and weeks as more metal leaves the LME system for Europe, where supplies are scarce.

Record high electricity prices in Europe have pushed up the cost of producing metals such as aluminium, which is widely used in the energy, construction and packaging industries.

Western Europe accounts for about 10 per cent of global consumption, which is expected to be about 70m tonnes this year.

Citigroup analyst Max Layton said in a recent report that aluminum supply risks remained high, with about 1.5 million to 2 million tons of aluminum production in Europe and Russia at risk of closure over the next three to 12 months.

The shortage in Europe has led to a sharp reduction in LME aluminium stocks, which have fallen 72 per cent since March last year to 532,500 tonnes, the lowest level since November 2005.

More worryingly, stocks of warrants available on the market, at 260,075 tonnes, are the lowest on record and could fall further as more metal leaves LME warehouses.

Wenyu Yao, an analyst at ING, said: "Aluminium continued to rise from Last Friday after warrant inventories fell to record lows, reflecting supply constraints outside China." .

However, supply growth has outstripped demand in the Chinese market... Demand in China has been weak due to covid-corona-related lockdowns.

Benchmark aluminium prices on the London Metal Exchange earlier hit a one-week high of $2,865 a tonne. It was last up 1.2% at $2,822.

Concerns about LME spot supplies have reduced the cash discount on three-month aluminium contracts to $26.50 a tonne from $36 a week ago.

The spot market tariff premium European consumers pay for aluminium is higher than the LME benchmark price and is at an all-time high of $615 a tonne.

Production in China, the world's largest producer and consumer of primary aluminium, hit a record high of 3.36m tonnes in April after the country eased restrictions on power production to allow smelters to expand operations.