Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
The aluminum price has reached $3,000 a tonne for the first time in 13 years amid expectations that supply disruptions are here to stay.
The metal climbed as much as 2.6% to $3,000 a tonne, the highest intraday level since 2008, on the London Metal Exchange, and was trading at $2,896.50 as of 2:51 p.m. in London.
In China, the metal surged as much as 5.4% to the highest since 2006.
[Click here for interactive aluminum price chart]
Other base metals were lower, with copper trading down 1.3% in London and nickel losing 3.8%.
Aluminum has surged about 14% over the past three weeks as supply risks increase throughout the industry, from bauxite mining in Guinea and alumina refining in Jamaica to aluminum smelting in China and beyond.
Chinese producers were dealt a fresh blow on Monday as Steelhome reported that Yunnan province, one of the largest aluminum producing provinces in the Asian nation, will enforce production curbs from this month in an effort to meet energy intensity reduction goals.
As of August, Yunnan aluminum smelters had already shut down nearly 1 million tonnes of annual capacity due to power curbs, state-backed research house Antaike said earlier this month. The restrictions began in May as the province was hit by a drought that cut its hydropower output.
Yunnan is home to around 10% of China’s aluminum capacity.
Smelters in the European Union are also facing rising costs with both carbon credits and power inputs at record highs, Goldman Sachs Group said.
“In China and increasingly in the EU, policy risk to aluminum supply is growing,” Goldman analysts including Jeff Currie said in a note released Monday.
While the bank doesn’t see the recent coup in Guinea as materially impacting bauxite, upside risks remain as regional tensions could generate further logistical bottlenecks, they said.
Snarled supplies will dog the industry through the rest of this year and most of 2022, according to many participants at the Harbor Aluminum Summit in Chicago, with some projecting it could take as long as five years to resolve the issues. The energy-intensive metal has risen by around two-thirds over the past year.
Aluminum Corp. of China Ltd., the country’s largest smelter, surged 8.1% in Hong Kong on Monday. Chinese material equities may see a further re-rating as more government moves to curb steel production to cut emissions could boost prices for cement, steel and aluminum, Citigroup Inc. analyst Jack Shang said in a note.
(With files from Reuters and Bloomberg)
