Reuters
- The price of aluminum has reached its highest level in the last 13 years in the markets.
- The escalation is directly related to higher electricity prices, which have been accentuated by production cuts in China.
It already costs the same per ton of aluminum as the electricity to produce it. Aluminum continues its escalation in the markets.
The metal has traded at its highest level in 13 years, due to the recovery of raw materials and after signs of slowing global growth, which stoked concerns about stagflation.
The light metal has risen to the highest levels since 2008, $3,040 per tonne, as the global economic recovery boosted demand, while electricity crises in Asia and Europe reduce supply. However, accelerating inflation coupled with stagnant growth, known as stagflation, could threaten this rebound downstream.
Bloomberg' s spot commodity index hit new record highs last week, helping to boost inflation. At the same time, power outages in China, India and Europe are likely to slow the expansion. Meanwhile, Goldman Sachs Group has cut its growth forecast for the U.S. economy for this year and next, blaming a lagging recovery in consumer spending.
The price of primary aluminum is already advancing by almost 54% in 2021, a rebound that has been gaining more and more prominence in recent months precisely because the electricity crisis has been penalizing Europe.
The relationship between the price of aluminum and the price of electricity is very close, since it is the metal that consumes the most energy for its manufacture, as shown by data from the Bloomberg agency. The factories consume about 14 megawatt hours, an intensity that is equivalent to the consumption of an average household in the United Kingdom for 3 years.
The composition of place can be made with a simple example: if the entire production of the alloy worldwide were counted as a country, it would be the fifth largest annual consumer of electricity on the planet, with more than 900 million megawatts consumed for its production, as reported by El Economista.
China's cutbacks as a major cause and effect
These uncontrolled aluminum price increases are therefore directly linked to the cuts in aluminum production as a result of high electricity prices, which continue to be out of control.
In fact, the cost of producing a ton of aluminum is now equal to the price of the metal itself. El Economista argues in its report that producing one ton of aluminum represents a cost of 2,800 euros in electricity alone. This would be almost all that a factory would be able to invoice for the sale of the metal at the current price of the metal. That is, around 3,040 dollars at present.
In addition, the deterioration in production, as a result of higher electricity prices, is also due to the aluminum supply cuts that are taking place in China, the world's largest producer, which is fully engaged in a campaign to cut its emissions volume. This would explain, to a large extent, why there has been such an accelerated escalation.
Via The Business Insider
