Global Aluminum and Bauxite Prices Surge Amid Supply Concerns

Global bauxite and aluminum prices have surged to a five-month high this month, driven by economic growth, supply concerns, and a weaker U.S. dollar. Analysts predict that prices could continue to rise from current levels, reflecting the broader market's ongoing uncertainties.

Aluminum prices are currently about 18% higher than they were a year ago, with futures also seeing gains across major markets like the London Metal Exchange (LME). On November 7, aluminum three-month futures on the LME reached $2,710 per tonne. Analysts attribute this surge to renewed demand from consuming industries and an increase in new trader positions.

The market has witnessed a bull run in aluminum and bauxite, with renewed buying interest pushing prices higher. Analysts from research agency BMI recently adjusted their aluminum price forecast for 2024 from $2,400 per ton to $2,450 per ton, anticipating continued price growth.

Key factors driving this upward momentum include mounting concerns over the availability of raw materials and broader economic shifts. Supply disruptions have been exacerbated by changes in Chinese policy, which have further impacted the global market.

China's recent announcement to end the 13% export tax rebate for certain aluminum and copper products by December 2024 has raised alarms among sector specialists. This policy shift could decrease the availability of Chinese aluminum to global markets, which may lead to increased prices due to tighter supply. Analysts have noted that this move signals a shift towards safeguarding China’s domestic producers, likely leading to a reduction of around five million tons of aluminum from global availability. Such a reduction would drive short-term price inflation for aluminum.

Additionally, pressure from international trade partners may have pushed China to eliminate subsidies considered unfair, with the removal of export rebates impacting semi-fabricated products like rods, plates, and foil. This change is expected to influence multiple industries globally, from beverage packaging to automotive production.

China is also dealing with challenges in raw material sourcing, with bauxite prices hitting record highs. The recent halt in bauxite exports from Guinea by Emirates Global Aluminum, combined with reduced output from Australia and Jamaica, has intensified supply constraints. Chinese smelters are now facing dwindling ore inventories, the lowest since 2015, affecting their ability to maintain current production levels.

Meanwhile, Russian metals producer Rusal has announced plans to cut aluminum production by at least 6% due to rising raw material costs and weakening domestic demand. The initial reduction will involve cutting output by 250,000 metric tons, though further details have not yet been disclosed.

A softer U.S. dollar has also contributed to the recent rise in metal prices, making metals more affordable for global buyers and driving optimism in the market. As countries dependent on Chinese aluminum look for alternative suppliers, global supply dynamics are expected to shift, potentially affecting future price trends.