Aluminum reached $3,000 a ton in London trading for the first time in 13 years amid expectations that supply disruptions are here to stay, while demand keeps rising.
The metal has surged about 15% 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 will enforce production curbs from this month in an effort to meet energy intensity reduction goals. Smelters in the European Union are also facing rising costs with both carbon credits and power inputs at record highs, Goldman Sachs Group Inc. 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 climbed as much as 2.6% to $3,000 a ton, the highest intraday level since 2008, on the London Metal Exchange. In China, the metal surged as much as 5.4% to $3,687, the highest since 2006. Other base metals were mainly lower, with copper trading down 0.4% in London and nickel losing 2.6%.
Shares of 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 drive up prices for cement, steel and aluminum, Citigroup Inc. analyst Jack Shang said in a note.