Prolonged Low Demand Overshadows European Aluminium Alloy Ingot Supply Issues

Aluminium Alloy Ingot prices in the European market remained relatively stable in the week ending March 10, 2023, amidst the dwindling demand from the downstream automotive and construction industries. According to a few market participants, overall European Aluminium Alloy Ingot demand has been low since the start of 2023, camouflaging supply disruption caused by the curtailment of approximately 1 million MT/year of capacity as a result of spiking energy costs and buyers' self-sanctioning of Russian metal. While some players now consider that demand for Aluminium Alloy Ingots will not return to the domestic market until the H2 of 2023, a modest improvement in demand could expose supply shortages and lead to rapid growth in Aluminium Alloy Ingot prices and premiums.

As per the analysis, the downstream construction markets remain subdued in the European market due to the Russia-Ukraine war and higher interest rates. Despite growth in electric vehicle output, European automotive production continues to fall, and even packaging markets are stuttering. However, few market participants consider the current state of the market to be strong, which may open the door for key players in the market, if any changes occur in the current market situation. Furthermore, there are no Russian Aluminium Ingot inventories in US warehouses because the major US buyers have been avoiding Russian metal. According to US Aluminium Alloy Ingot players, Russia's metal will not affect the global Aluminium Alloy Ingot market amidst the ongoing bearish demand.

Market players anticipate that significant price hikes in the Aluminium Alloy Ingot can be thwarted by dealing with Russian metals. Any increase in demand will almost certainly result in a much more volatile situation, with prices and premiums vulnerable due to a shortage of supply. Depending on demand, China might ship Aluminium semi-products to Europe. However, several European producers of high-purity aluminium experienced problems in late 2022, causing supply to fall, and the premium differential to widen rapidly.

Aluminium Alloy Ingot demand has improved recently, but players are once again concerned due to the reduced 1 million MT/year European Aluminium Ingot capacity. Market participants believe that rising imports of Chinese metal in the form of aluminium semi-products that count as downstream processed aluminium but are simply remelted back into primary aluminium units could be the solution to replace lost supply. However, tariffs and duties on Chinese Aluminium exports mean that this trade will only be viable at much higher prices.

The current market situation states, domestic capacity reductions and a lack of Russian metal are still limiting the supply of aluminium in Europe, and new production facilities are unlikely to provide any relief without a substantial price hike. With Russian metal no longer being shipped to Europe, any change in demand levels could be a real challenge for the European aluminium industry. Thus, ChemAnalyst predicts that the major supply concern will have a knock-on impact, driving up demand for aluminium alloy ingots in the upcoming weeks. Amidst the limited supplies and import offers, the Aluminium Alloy Ingot prices are anticipated to improve.