Multiple tailwinds for aluminium majors

Aluminium prices have seen a bull run recently, rising to over $2,700 per tonne from the tariff-shock low of $2,275 per tonne in April’ 25.

- DEVANGSHU DATTA

The surge is supported by the rate cut from the US Federal Reserve.

‘The metal also has a tight supply-demand ratio. Incidentally, aluminium prices are moving up, while alumina is trending lower. A weaker Dollar Index, geopolitical tensions, and easing financial conditions could all add momentum to the bull-run in the metal.

Globally, primary aluminium has tight capacity utilisation at 98 per cent. China has set a cap of 45 million tonnes per annum (mtpa) on aluminium production which constrains supply. This may lead to additions of recycling capacities, and there’s tightness in the scrap market.

The EU is considering suggestions that export controls should be imposed on aluminium scrap with a duty of up to 30 per cent. The tight supply-demand may not ease in the medium-term. Although there would be an incentive to create more capacity if prices trend over $3,000 per tonne for an extended period, it would take long gestation and large capex to build new capacity.