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Could ‘green’ projects help cushion the slowdown in aluminium demand?

Demand for aluminium around the world over the course of 2023 has been – to put it mildly – disappointing, and recent data has supported this conclusion.

The LME aluminium price has declined by around 7% over the course of 2023, with prices trending sideways for months now as power costs have helped fend off further declines. Given a combination of China’s sluggish recovery from COVID-19 lockdowns, and stagnant economic growth in Europe and the United States, this situation is sadly not overly surprising.

Could, however, the green sector be a source of hope for the global aluminium market? The prospect has been raised by Dutch financial services group ING**, which has signalled its belief that the rising rates of electric vehicle (EV) adoption and environmentally friendly infrastructure investments could help counteract the fall in demand for the lightweight metal in the more “traditional” industries this year.

There could be reason for hope for aluminium, away from traditional industries 

If the global aluminium market was purely dependent right now on orders from traditional sectors such as packaging, building and construction, it would be in an even more dire situation; ING has observed that “sales, starts, and under-construction year-to-date numbers are all in negative territory.”  While Constellium’s recent financial statement reports packaging demand is down in Europe and the USA.

However, ING noted that the “green parts” of the Chinese economy were actually on the up.

Aluminium has many qualities suited to energy generation, transmission, and storage technologies – encompassing such solutions as solar and wind power, hydrogen production, alternative fuel cells, high-voltage cables, and batteries – there could be some hope for related aluminium demand to support demand in 2024.

It is in China where the growth in green technologies will largely be powered – supported by a variety of consumer subsidies and state support more than half of electric cars manufactured on roads worldwide, are now in the East Asian country.

China’s new energy vehicles (NEVs) sector – which comprises both plug-in hybrids and battery electric vehicles – has recorded stellar growth as of late. The China Association of Automobile Manufacturers (CAAM) has said that NEV sales in the country were 956,000 during October, reaching a new record, after the September figure of 904,000 had, itself, been a record.

It should, then, perhaps be no great surprise that aluminium prices in China have tended to be stronger than global prices during 2023, with the Shanghai Futures Exchange price trading at a significant premium to the London Metal Exchange price since the Spring, despite the wider Chinese economy suffering a slowdown.

A muted outlook for international aluminium demand

The same commitment cannot be seen among governments outside of China with EV sales growing as a proportion of total sales but with total automotive sales remaining depressed, without more subsidy support EV’s contribution to global aluminium demand in the rest of world so far remains more potential than actual.

In the meantime, therefore, the situation for aluminium demand outside of China remains lacklustre, even if there are hopes of slow increases in demand and prices over the course of 2024.

If you are a UK distributor on the lookout for an extruded aluminium products company that you can trust to provide a complete back-to-back and ex-stock service, please don’t hesitate to enquire to MCA UK today.

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