Overview
Aluminium prices broke to an all-time high at the start of the month due to concerns following Russia's invasion of Ukraine, along with short-covering by traders who had bet that prices would fall and were forced to buy back.
Since then, however, the price has slumped by 16.5%, partly due to Germany's successful efforts to halt sanctions against the import of Russian aluminium in the latest EU sanctions package (effective 15 March).
If aluminium supplies were to tighten significantly and drive-up prices, then we may see China – which is responsible for over half of the world’s production – begin to export more, which would eventually cap any further rise.
Quantitative 12-month forecast
Our machine-learning model forecasts a correction down to US$2800 over the next two months – a drop of 12.6% from today, before steadily rising back up to US$3650 by November. Our model then predicts prices will fall back to US$2740 by March 2023, around the level they were at the beginning of 2022 – pre the Russia/Ukraine conflict.
Supply and demand
Russia is the third-largest exporter of aluminium in the world, not far behind Canada and the UAE, so naturally, any disruption to Russian exports would likely cause a spike in the price.
Germany is the second-largest importer of aluminium, primarily using it in the construction of their luxury cars, so they are economically incentivised to keep sanctions on Russian aluminium on the softer side.
China is both the largest producer and consumer of aluminium – it is responsible for over half of the world's production and it consumes most of that internally. However, the recent regional lockdowns that have been reintroduced, due to Covid cases reaching a two-year high, could seriously impact local demand for aluminium, and if prices are high enough it will make economical sense for China to start exporting it more heavily, likely putting a dent in the price of the lightweight metal.