Blog Post Affecting Factors on the Aluminium Price Trend

Due to its desirable qualities, including lightweight, corrosion resistance, and durability, aluminium is a highly adaptable metal that finds extensive use in many industries. It is frequently employed in construction for window frames, roofing, and building facades. Due to its lightweight, it is used in the transportation sector to produce vehicles, trains, and planes. A lot of food and beverage product packaging also makes use of aluminium.

The price of aluminium is closely watched by investors, businesses, and governments around the world due to its wide range of applications. A complex web of variables, such as the cost of production, supply and demand, and geopolitical developments, affect the aluminium price. We’re going to assess those factors in more depth below.

The Electricity Cost

The price of electricity has a significant impact on the price of aluminium. Electricity is the main energy source for smelting aluminium, which is a process that consumes a lot of energy. Therefore, any changes in the price of electricity have a big impact on aluminium's price.

Depending on a variety of variables like the accessibility of resources, the state of the infrastructure, and governmental policies, the price of electricity can differ significantly between nations. The ability to produce aluminium more cheaply gives nations with reliable and affordable electricity sources a competitive edge on the world market.

Depending on the source and cost of the electricity, the price of aluminium may change. As an illustration, electricity produced using renewable energy sources like solar or wind is typically more expensive than electricity produced using fossil fuels. Therefore, switching to renewable energy sources by aluminium producers may result in higher production costs and higher aluminium commodity prices.

Industry Events and Trends

Events and trends in the industry are also significant variables that can affect the market trends in the price of aluminium. Several industries, including construction, transportation, packaging, and electronics, have an impact on the demand for aluminium. The demand for aluminium and, consequently, its price, can be significantly impacted by changes in these industries.

The construction sector is one of the biggest consumers of aluminium. Numerous building construction applications, such as roofing, window frames, and structural elements, use aluminium. As a result, the demand for aluminium may be significantly impacted by changes in the construction sector.

Another important user of aluminium is the transportation sector. Automobiles, planes, and ships all make use of aluminium in the transportation industry. The demand for aluminium can be significantly impacted by any changes in the transportation sector, such as a move towards electric vehicles or changes in fuel prices.

Global Events, Demand and Economy

The price of aluminium is largely influenced by global events, demand, and the state of the world economy. The level of economic development and growth is a key factor in determining the world's demand for aluminium. As a result, the demand for aluminium may decline, which would result in a decrease in prices, if there is a decline in economic growth or a downturn in the global economy.

Moreover, the demand for aluminium may be significantly impacted by political unrest, trade conflicts, and natural disasters. The global demand for aluminium, for instance, may suffer if a certain nation imposes trade restrictions on imports or exports of aluminium. Similar to this, any natural disasters that affect important areas that produce aluminium, like hurricanes or earthquakes, can disrupt the supply chain, cause a shortage of aluminium, and raise prices.

On the other hand, factors like urbanisation and population growth may increase the need for infrastructure expansion, which will increase the demand for aluminium. The use of sustainable methods and the transition to renewable energy sources can also positively affect the demand for aluminium.

International Trade

An important factor influencing the price trend of aluminium is international trade. The demand for aluminium can be significantly impacted by tariffs and trade restrictions, which in turn affect the price of the metal. The demand for aluminium may decline if a country imposes tariffs on imported aluminium because domestic producers may be more competitively priced. Prices could drop as a result of a decline in demand. Similarly, trade restrictions like export bans can result in a global market supply shortage and higher prices.

The demand for aluminium, on the other hand, may rise in response to an expansion in global trade, which might raise prices. Increased international trade and economic growth can be facilitated by free trade agreements and the liberalisation of trade regulations, which will increase demand for aluminium.

Changes in exchange rates can also have a big impact on the aluminium market.. Since aluminium is priced in US dollars, variations in exchange rates may have an impact on prices across the globe. A stronger dollar may make buying aluminium more expensive for consumers using other currencies, which would reduce demand and drive down prices.

Aluminium Price Trend 2022

Aluminium prices started the year by rising sharply. The energy crisis in Europe combined with the start of the Russian invasion of Ukraine led to shortages and production slowdowns. As a result, the price of aluminium rose by nearly 5% in January and over 6% in February, hitting an all-time high of just under $4,000 per metric ton.

But once we entered Q2 of 2022, prices began to decline. This pattern persisted for the majority of the year. Factors such as concerns about recessions in the US and Europe cast doubt on future demand for metals like aluminium, causing prices to fall.

Aluminium Price Forecast 2023

Many forecasts for 2023 predict aluminium prices to be relatively bullish moving forward. One of the major reasons for this is the continued lifting of zero-Covid restrictions in China, leading, it's hoped, to an increase in consumption in the country. That would mean more demand for aluminium and increased prices as a result.

At the same time, production is expected to remain stagnant, supporting higher prices in 2023. Although, slow growth in much of the world might prevent the price of aluminium from hitting the unprecedented highs of early 2022.



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