Weak demand compels Aluminium to a four-month low
Weak demand compels Aluminium to a four-month low

Weak demand compels Aluminium to a four-month low

  • 12-May-2022 6:28 PM
  • Journalist: Nicholas Seifield

New Delhi, India: In April, production activity in China contracted while manufacturing activity in the U.S. and European nations too was hindered. Due to China's pandemic prevention and control measures, concerns for economic development and declining demand are the main driving force of vending pressure on base metals. The slow gain in the global production activity, the high Fed interest rate, and the widened inflationary pressures on the economic activities also provoked this drag. The soaring U.S. dollar made commodities costs in U.S. dollars more costly for buyers and the holders of other currencies, which is a significant headwind for demand and prices.

Further, a strong dollar was primarily backed by a demand concern made to a slowdown in production activity, particularly in China. According to the market players, domestic demand from China has decreased, resulting in negative market sentiment. The global Aluminium market witnessed a drop of nearly 32 % since early March and the lowest level since January 10.

From the demand side, the domestic pandemic revived in April, and the transportation and other issues were not well subdued, so the downstream manufacturing was less than expected. The Aluminium demand from the automobile and construction sector decreased significantly yearly. The prevailing Aluminium ingot inventory did not plunge smoothly, and the arrival of a few Aluminium ingots was delayed.

According to our sources, with the improvement in the COVID-19 situation and the acceleration of transportation in May, delayed quotations for Aluminium ingot arrivals may come. The domestic inventories for Aluminium ingot will likely maintain their growth at the beginning of the month. Our Chinese sources stated that few enterprises in Gansu, Guangxi, Yunnan, and other regions planned to resume production. At the same time, some new production capacity in Qinghai, Sichuan, and other regions are anticipated to be produced.

As per ChemAnalyst, " The transportation efficiency will improve, and the terminal companies are also expected to resume production, reviving downstream demand in May. It is expected that Aluminium operating rates will grow in the month but be lower than last year. However, with the recovery of downstream consumption, the inventories will decline. Our analysis anticipates that the short-term Aluminium costs will remain weak and volatile. ChemAnalyst continues to pay attention to the impact of the domestic epidemic on the industrial chain. 

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