Aluminium prices broke through the US$1,700-per-metric-ton limit at the London Metal Exchange earlier this week. Experts chalk up the fifteen-month high to rising costs and a significant uptick in aluminium demand.
Although the price has bumped up against the US$1,700 ceiling on the LME four times this year, the price finally broke through in part due to an increase in energy prices. The People’s Republic of China has been the world’s primary source of the metal over the past couple of years, and it has seen a rise in the price of thermal coal of almost seventy percent. The rise in price has put the clamps on several smelters in China, which has, in turn, done a great deal in drying up a large portion of the excessive capacity that has cropped up in-country in recent months and years.
In addition to rising energy prices, experts note the rise in aluminium demand over the past several months. Demand from China’s construction and infrastructure sectors has been strong so far this year, and the automotive sector has continued its robust pace as well – in September, Chinese automobile sales jumped 27% year-on-year. September’s numbers are largely representative of the entire year as well, as sales have increased for seven straight months, and the increase has been above twenty percent for the last three months (including September). Analysts have little reason to believe that this trend will end in the near future.
Aluminium trading on the SHFE has been at higher levels than in the recent past as well, as 1612 aluminum has been trading in the RMB14,000 per metric ton range over the past several days. Shanghai market watchers expect contracts on that market to remain high for at least the near term.