LONDON – Aluminum inventories in London Metal Exchange (LME) warehouses, already at their lowest level in nearly 17 years, are likely to continue falling in the coming days and weeks as more metal leaves the LME system and heads to Europe, where supplies are tight.
Record energy prices in Europe have driven up production costs for metals such as aluminum, which is widely used in the energy, construction, and packaging sectors. Western Europe accounts for about 10% of global consumption, estimated at around 70 million tons this year.
Max Layton, an analyst at Citi, said in a recent note that risks to aluminum supply remain high, with between 1.5 million and 2 million tons of production at risk of closure across Europe and Russia in the next three to 12 months.
The shortage in Europe has led to a sharp reduction in aluminum stocks on the LME, which have fallen 72% since March last year to 532,500 tons, their lowest level since November 2005.
Even more worrying for the aluminum market is that guaranteed stocks metal available for the market are at 260,075 tons, the lowest figure in history, and are likely to continue falling as more metal continues to leave LME warehouses.
"Aluminum continued to recover from last Friday after guaranteed stocks fell to a record low, reflecting shortages in the market outside China," said Wenyu Yao, an analyst at ING.
"However, supply growth has outpaced demand in the Chinese market (...) demand (in China) has been weak due to COVID-related closures," he added.
* Benchmark aluminum prices on the LME earlier in the session hit a one-week high of $2,865 per ton and gained 1.2% to $2,822 in their latest trading.
via Euronews
