For the Quarter Ending September 2022
In the North American market, Aluminium Wire prices showcased a rising trend despite subdued spot demand during the third quarter of 2022. Aluminium marched higher in August and September, worrying that stoppages due to high energy prices or other disruptions would spur shortages. Due to the high energy intensity of base metal production, market participants are observing production reductions in Europe. Market participants are in a position where they don't need to push from consumption to get price hikes because more cuts are on the way; Europe's energy crisis is far from over. Furthermore, since energy prices began to rise last year, European smelters have reduced annual aluminium production by 800,000 to 900,000 tonnes. According to the buyer, upstream aluminium prices are close to bottoming out. However, secondary aluminium alloy manufacturers who buy primary aluminium report that the cost of aluminium products has fallen due to a general decline in the US aluminium market.
In the Japanese market, Aluminium Wire prices showcased a rising trend amidst a bearish demand outlook. As per market players, the tradeable volume is low, with no incentive to deliver to Japan. Japanese traders and end-users are wary of purchasing metal on the international market. In Japan, there is a significant volume, and suppliers try to destock to avoid backwardation and its effects on balance sheets. Despite smelter curtailments announced in Europe, market participants remained bearish due to high inventory levels in Asia, particularly Japan, and were more concerned about forwarding demand. Manufacturers claim that, while orders are up, inflation is starting to bite, and downstream industries such as the automotive industry will suffer. On the other hand, fourth-quarter negotiations have begun, with lower offers received than those heard in the third quarter. The South Korean market remained unchanged from the previous week due to weak buying activity.
Aluminium Wire prices witnessed a gliding movement during the third quarter of 2022 due to the weak spot demand and abundant supply of imported units. Over the last six to eight weeks, the spot demand outlook for wire has weakened, and imports are currently outpacing capacity loss from production cuts. Some participants expected the cuts to have little effect on the premium due to softer demand and a recent increase in Asian imports, while others remained bullish due to concerns about ingot availability. Participants are also concerned about overall aluminum availability as LME warehouse stocks continue to decline. Participants state that logistics issues remained a concern when attempting to source units from other regions. While some saw ongoing logistics issues as a barrier to imports, others were less concerned, noting that European premiums remained close to recent record highs, making Europe an appealing destination for material imports. Europe's high energy and electricity costs have forced several smelters to close this year. Alcoa announced in August that it would cut production at its Lista smelter in Norway by one-third.
For the Quarter Ending June 2022
Aluminium Wire prices fell in the United States during the second quarter of 2022 due to weak demand, rising production costs, supply chain delays, and the Federal Reserve's aggressive monetary policy. According to market participants, manufacturing activity has slowed as manufacturers face supply-chain delays and labor shortages. Furthermore, new orders and stockpiles were limited, and customer resistance to high prices contributed to a slowing of new orders, but it also reflected deficiencies and growing concern about the outlook. The drop in the domestic demand and improved production activity of Aluminium amidst the rising inflationary pressure further aggravated the market queries. However, the bearish macroeconomic aspects and waning demand outlook further prompted quotation inquiries to drop. The cessation of the Hawesville Aluminium smelter further exacerbates the supply chain and impacts the cumulative demand outlook in the U.S.
Chinese Aluminium Wire prices fell in the second quarter of 2022, owing to shrinking demand in China amid sporadic lockdowns. According to market participants, the currencies have shifted unfavorably, with the dollar strengthening and the yuan weakening. Domestic Aluminium downstream consumption increased as work and production resumed in Shanghai and other locations, and market sentiment improved. The procurement was completed as needed, and the market transaction remained unsatisfactory, but the warehouse issue continued to impact the poor market transaction. Although the problem of poor transportation caused by the domestic pandemic eased in May, terminal inquiries remained modest.
Meanwhile, in June, domestic Aluminium inventories fell due to the scandal surrounding the repeated pledge of the same Aluminium wire stocks in a social warehouse. A surge in global inflation, driven partly by rising energy costs, means that consumers will likely buy fewer large appliances, lowering demand for industrial metals. Raising interest rates by the world's major central banks to control inflation may reduce the requirements.
In European nations, the Aluminium Wire prices declined in the second quarter of 2022 compared to the Q1 of 2022, mainly due to the limited buying queries amid fluctuation in LME prices. However, due to hostilities between Eastern European nations and rising crude oil prices, the price of Aluminium soared globally during the first quarter. Furthermore, supply disruptions and sanctions imposed on Russia by Western markets were factors in the rise in Aluminium prices. Moreover, premiums fell due to sluggish demand from the automotive industry, dealing with chip shortages. Again, due to a constrained container market and high freight charges, metal could not be transferred from Asia to Europe or North America, where premiums are significantly higher. As a result of the high energy costs exacerbated by Russia's invasion of Ukraine, European Aluminium smelters continued to reduce production activity.
For the Quarter Ending March 2022
In North America, Aluminium wire prices witnessed soaring market sentiments owing to the tight demand-supply balance. According to market players, Aluminium prices showcased a sharp increase of roughly 20 percent in March 2022 compared to end-January 2022, fuelled by rising geopolitical risks amidst the ongoing Russia-Ukraine combat. Aluminium prices have touched an all-time high of USD 3870/tonne in the first week of March 2022, showing extreme tightness in the global supply chain. A low inventory level of Aluminium worldwide coupled with the sanction on Russian Aluminium exports has exacerbated the metal availability in the rest of the world, holding prices at a high level till normalcy is restored. Aluminium wire prices remained high during the first quarter as a ripple effect.
In the first quarter of 2022, China levied pressure on Chinese authorities to adhere to strict policies due to the outrage of the pandemic. Along with it, China's controlled carbon emission policy also impacts pressure on the market. Thus, in China, production activity and its supply chain are disrupted. However, in India, manufacturers claim that the production margin of Aluminium is more than the demand. Market players are hoping to exceed records in profit; India, one of the leading exporters of Aluminium, will confront an opportunity to export Aluminium at high prices. Aluminium prices have risen more than 20 % as compared with January 2022. The demand from the European nation will boost India's exporting activity for Aluminium, making India the lead exporter. As a ripple effect, the Aluminium wire prices witnessed bullish market sentiments during the first quarter of 2022.
In Europe, the Aluminium wire prices showcased a rising trend amid the ongoing hostilities between Eastern European Nations. This soar in Aluminium wire prices is mainly due to the Russia and Ukraine dispute; Russia is the fifth largest exporter of Aluminium, exporting 6-8% of Aluminium globally. Ukraine is one of the exporters of Alumina and Aluminium ores for Russia. In the conflict between Russia and Ukraine, various commodities' whole value supply chain has been disrupted, mainly metals and crude oil. Australia's ban on exporting Alumina and bauxite to Russia has caused a significant threat to Aluminium's production activity. However, the other factors affecting production growth are elevated coal prices and power pressures from winter. Thus, European nations depend on Aluminium imports as they have reduced metal production. The sanctions imposed on Russia are not going to be removed readily. Therefore, Aluminum costs are expected to surge 5-20% in the upcoming quarter.