Aluminum price has reached a new annual minimum
On Monday, the price of aluminum for cash sales fell to $ 1,424.50 per ton compared to the previous closing in London. Aluminum reached not only a new annual minimum, but it fell to its lowest level since November 23, 2015.
The price of aluminum hit 4-year lows as uncertainty about how much damage the pandemic would cause demand. This kept investors on the sidelines after negative data on jobs in the United States.
Fund managers and operators had difficulty calculating what would be higher. Either the loss of demand due to industry closings in many areas, or lower production due to mine closings.
Ole Hansen, head of the commodity strategy at Saxo Bank, said that there are many unknown factors now. The market is trying to digest them all.
Aluminum fell due to the abundance of supplies
Minimal growth in Chinese manufacturing activity in March 2020 caused concerns about the collapse in demand for metals. Worries about an excess of supply have also been growing.
Aluminum is used, among other things, in the manufacture of parts for airplanes and canned beverages. Carsten Menke, an analyst at Julius Baer, said that persistently high inventories of aluminum in China, the world’s largest exporter of the metal, and disruptions by the pandemic in the auto industry, responsible for about 20% of demand, have scared markets. The market expected China to be on the road to a recovery path, but this has not occurred as quickly as expected.
Manufacturing activity dropped in much of the world in March. Steep declines in Germany and Japan overshadowed the slight improvement in China.
Ole Hansen, head of a commodity strategy at Saxo Bank in Copenhagen, said that the demand is falling off a cliff. Consumer confidence is shaking up around the world. Commodities are responding. Trust was also hit after the United States Congress struggled to reach an agreement. The focus will be on whether they can approve a package, which can bring some relief to the market.
Due to the drastic drop in demand, the prices of the metal, used by transport and packaging sectors, have plummeted by -17% in 2020.
Raising fears of a substantial global surplus brought aluminum to trading below $ 1,500 per tonne in 2020. This is the first time this has happened since 2016.
Colin Hamilton, a BMO analyst, stated that in the mid-year there would be a need of 4.2 million tonnes of supply cuts. The surplus would amount to 1 million tonnes.
