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Aluminum prices are expected to stay elevated in 2024 owing to a tightening market balance on the back of strong growth in global demand outpacing supply, says BMI, a unit of Fitch Solutions Group.
In a report released this week, the analytics firm said it expects aluminum demand to rise 3.2% year-on-year in 2024 to 70.35 million tonnes, compared to a projected 1.9% growth in supply to 70.6 million tonnes.
The demand growth, BMI noted, will be propped up by less traditional sources, specifically China’s clean energy sector. It added that China is the largest consumer of aluminum by far and is expected to take up 63.5% of this year’s global demand.
On the supply side, BMI said it is more optimistic than before due to solid production growth between January-August and an improvement in weather conditions in China’s Yunan province, a key producing region. Still, it flagged recent disruptions in the raw material market, which has the potential
to constrain aluminum output growth, particularly in China.
Despite a stronger demand, the primary global aluminum market is still expected to remain in surplus this year, but this surplus will shrink significantly by four times, from 384,000 tonnes down to 96,000 tonnes, BMI said.
The market dynamics will also be reflected in aluminum prices, and the firm is anticipating a 6% increase in average price levels in 2024, which represents a notable turnaround from last year, where weaker factors drove prices down by 15.6% compared to 2022 levels.
This renewed optimism stems from two key factors: growing supply concerns in the raw material market and broader economic developments, BMI stated.
BMI analysts also raised its 2024 aluminum price forecast from $2,400/tonne to $2,450/tonne to reflect these expectations, but noted that they do not expect prices to reach the heights seen earlier this year, when supply woes fuelled a short-lived rally to a year-to-date high of $2,768/tonne.
Beyond 2024, BMI expects aluminum prices to remain elevated, as demand is supported by the accelerating shift to a green economy.
Aluminum is classified as a critical mineral by the US, EU and Canada, highlighting growing concerns over supply in the longer term, which is set to drive growth as major economics introduce measures to boost aluminum production growth, it said.
As a result, the firm forecasts global aluminum consumption to increase from 70.5 million tonnes in 2024 to 88.2 million tonnes by 2033, while average annual output will grow 2.5% during that period.
