Strong demand in China and the United States is conducive to aluminum prices

According to Reuters reports, strong demand for aluminum in China and the United States, rising freight costs, and tight scrap supply are expected to promote further increases in the price of this metal used in transportation, packaging and construction.

The benchmark aluminum price on the London Metal Exchange is about US$2,050 per ton, which is close to the US$2,080 touched earlier this month, the highest level since October 2018. Industrial activity and demand since April due to the coronavirus (Coronavirus) has risen by 40% since it was blocked and stalled.

Since then, the relaxation of restrictions and economic and fiscal stimulus policies, especially in China, have promoted economic growth and demand.

Jorge Vazquez, founder of the consulting firm Harbor Aluminum, said: "Economic activity and aluminum demand fluctuate sharply, which is reflected in prices."

Vazquez predicts that LME aluminum prices will reach at least US$2,200 before the end of the first quarter of 2021.

The physical market premium paid on the basis of the LME price is also rising.

In the United States, since October last year, rising truck transportation costs, reduced scrap, and expectations that aluminum imports from Canada will re-impose tariffs have pushed the paid tariff premium up by more than 15% to more than $300.

Vazquez said: "Canada's aluminum exports to the United States exceeded the October hard export quota limit."

“As demand in the United States grows, a retroactive tariff of 10% imposed on countries that imported aluminum in October, and the corresponding lower hard quota in November, may further reduce aluminum supply.”

According to S&P Global Platts (S&P Global Platts), the premium in the Japanese spot market is about $115 per ton, which has risen by 50% since January.

This is mainly because Chinese consumers buy aluminum overseas, because aluminum is cheaper than locally supplied aluminum, which is called import arbitrage.

"The single biggest factor supporting Japan's premium is strong import arbitrage with China. The shortage of containers is a factor, but not the main driver. China will continue to import in December," CRU analyst Eoin Dinsmore said.

"U.S. end users report that aluminum utilization is high, and orders are steadily picking up."