Aluminium prices are facing considerable challenges in 2023, as indicated by reports from Australia’s Office of the Chief Economist and research agency BMI. The ongoing weakness in global demand is expected to prevent a recovery in aluminium prices this year. Projections suggest a year-on-year decline of 13% in the London Metal Exchange (LME) aluminium spot price for 2023, largely influenced by a slowdown in global economic growth.
ING Think has emphasized that the fundamental factors affecting aluminium remain largely unaltered, with persistent weak demand and no major production restarts anticipated in Europe until at least 2025. BMI, in light of these conditions, has revised its 2023 aluminium price forecast downward to an average of $2,300 per tonne, down from the previous estimate of $2,500.
The sluggish pace of Chinese aluminium product exports in recent months further underscores the subdued global demand. BMI attributes this trend to the challenging global economic environment and a contraction in the manufacturing sector, which relies heavily on commodities. China, the world’s largest aluminium consumer, plays a pivotal role in influencing aluminium prices.
China’s construction sector, accounting for 30% of domestic aluminium demand, is also grappling with difficulties, particularly in light of the recent bankruptcy filing by property giant Evergrande.
Additionally, concerns have emerged regarding the significant presence of Russian aluminium in LME warehouses, potentially causing LME aluminium prices to mirror the fluctuations in Russian-origin aluminium prices.
On the supply side, BMI anticipates a 2.2% increase in Chinese aluminium production in 2023 compared to the previous year. However, any potential boost in commodity demand driven by Chinese government stimulus measures is expected to be modest, given the financial risks confronting the Chinese economy.
In the longer term, aluminium prices are anticipated to see an uptick as the global shift toward the green economy bolsters demand for this versatile metal.
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