Analysts Predict Aluminium Price Recovery in 2024 as Supply Stays Tight

Aluminium prices, which have dropped by about 9% since hitting a two-year high of $2,695 per tonne on May 29, 2024, are expected to rise again due to tight supply for the remainder of the year, according to industry analysts. The metal reached a five-week high on Tuesday, driven by an alumina shortage in China caused by rising consumption.

BMI, a unit of Fitch Solutions, maintains that supply will remain tight, fueling price increases throughout 2024 despite a slightly more positive supply outlook in the second half of the year. The firm has revised its forecast for the aluminium market surplus to 97,000 tonnes, down from the previously forecasted 116,000 tonnes, with demand growth expected to outpace supply.

While supply and demand risks persist, BMI notes that sustained demand from China's clean energy sector and a tighter market balance will help cap price losses. However, ING Think, the economic and financial analysis arm of ING, highlighted that rising aluminium inventories—now at their highest levels since 2021—could weigh on prices in the short term as the market absorbs this stored material.

The Australian Office of the Chief Economist (AOCE) noted that the LME spot price for aluminium reached a two-year high of $2,695 per tonne in response to a ban on Russian aluminium from LME warehouses after April 12, 2024. The AOCE forecasts that the LME aluminium spot price will rise by 6.2% year-on-year in 2024, averaging $2,390 per tonne.BMI reiterated its aluminium price forecast for 2024 at an annual average of $2,400 per tonne, citing improved market fundamentals this year. ING Think added that a weaker dollar and a potential Federal Reserve rate cut could also provide support for aluminium prices.

The Russian share of aluminium on the LME has continued to decline since May following the LME's ban on newly produced Russian metal, driven by US and UK sanctions. This, combined with new US tariffs on Chinese aluminium exports, is expected to further influence the market in the second half of 2024.

BMI remains optimistic about global aluminium demand growth in 2024, despite potential risks from demand-side factors. The AOCE pointed out that the curtailment of production at Australia's Kwinana alumina refinery is likely to keep alumina prices at historically high levels, which could further impact aluminium prices.

In China, primary aluminium production is expected to grow by around 2% in 2024, reaching approximately 42 million tonnes, contingent on the availability of hydropower in Yunnan, according to ING Think.