Industrial Metal Update

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As global demand for everything from beer cans to packaging rebounds from the pandemic, aluminum prices are approaching their highest levels in 10 years.

Metal prices surged by 31% in 2021, reaching a closing high of US$2,615 per ton this week.

For an industry that has been oversupply for years in China’s continued expansion, price increases are a welcome respite. The world’s largest aluminum producer’s share price has risen by double digits this year, with Alcoa rising 68% and Europe’s Norsk Hydro rising 47%.

BMO Capital Markets analyst Colin Hamilton (Colin Hamilton) said that this year may surpass 2010 and become “the largest annual demand growth in history.”

Aluminum has a wide range of uses in canning, packaging, construction, and aerospace, and it benefits from economic growth. It is also used in the battery pack of electric vehicles and the body of some high-end models.

Eoin Dinsmore, an analyst at consulting firm CRU, said: “As the global economy has experienced a fairly widespread rebound, aluminum has benefited in almost all aspects.”

More than 74% of all beer sold in the United States is packaged in aluminum cans and bottles. BMO predicts that global consumption will increase by 8.5% to 68.2 million tons this year.

Aluminum also benefits from limited supply. The drought in China’s Yunnan province has reduced hydropower production in the area, causing shortages and prompting the local government to require aluminum smelters to reduce their use.

CRU’s Dinsmore stated that Yunnan will account for 50% of global aluminum production growth between 2020 and 2023, so any shortage will have a global impact.

“This is very important for the market-this is where the supply growth occurs,” he added.