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The war in Ukraine is pushing aluminum to new heights, the price per tonne is hovering around 3,500 dollars on the London metal exchange, this is a historic record. Aluminum is the most exposed industrial metal because it depends on Russian supply.
Russia is a major aluminum exporter, in 2021 it was the world’s third largest producer following China and India, according to the world bureau of metal statistics. The United States, Japan and even the European Union are among its main customers. Investors fear that in response to Western sanctions, Moscow may decide to limit or even suspend aluminum deliveries to these countries.
The price of metal is also increasing for another reason. Many Russian banks are excluded from the Swift interbank platform, an essential cog in the wheel of global trade and finance. This makes it increasingly difficult for Russian players to sell their production on the world market.
Limited supply, strong demand
The war also complicates the maritime transport of raw materials. According to Archyde.com, Russian aluminum giant Rusal has halted production at the Nikolaev refinery in Ukraine citing logistical challenges on the Black Sea. Not to mention that aluminum stocks in the London Metal Exchange warehouses are now near their lowest level in 15 years, according to Commerzbank.
Added to all these factors is the surge in gas prices. Aluminum smelters, which are very energy-intensive, might indeed reduce their production due to high energy costs. Faced with this limited supply, demand should remain vigorous this year, silver metal is among the most used by the industry. Prices should therefore continue to rise. The American investment bank Goldman Sachs estimated at the beginning of February that a tonne of aluminum might reach 4,000 dollars this year.