Aluminum prices remain hot this year with prices already up 15% this year. Since the beginning of the COVID pandemic, prices have increased by over 80% and are currently at $3,237.40 per ton, a higher level than at the time of the 2008 crisis.
The main reason for this is said to be the supply chains, which cause aluminum prices to rise. Looking at the two largest producing countries, China and Russia, this seems to be a plausible explanation.
In China, attempts have been made since last year to push ahead with decarbonization, but in some cases, they are not yet sure whether they want to accept an economic downturn. With 37 million MT, the country produces more than half of the world’s aluminum demand. Obviously, supply chains can be disrupted if China lowers production output or again struggles with local COVID outbreaks. The Chinese government has actively adjusted regulations in aluminum production to prevent overproduction. For example, electricity price limits have been lifted. In addition, China imported more aluminum last year than ever before with 3.21 million tons. This shows the direction that China’s government has taken.
The second-largest producer of aluminum, albeit far behind China, is Russia with around 3.6 million MT. The story with Russia is probably no secret with the current Ukraine situation raising concerns about a supply chain disruption. The latest news from the U.S. is, enough Russian troops are now ready to invade Ukraine. The question remains what Russia would gain from this step. Russian President Putin has therefore reiterated that if Ukraine were to join NATO or remove Crimea from Russian Federation, war with Russia is inevitable. He also said that in case of war, there will be no winners. Earlier this week, French President Macron traveled to Moscow for talks. Both sides agreed that a diplomatic solution was still possible.
A war with Russia would probably hit the U.S. hard since about 9% of U.S. aluminum imports come from Russia.