Aluminium market oversupplied due to continued high production

by David Fleschen

Even though no new record high was reached at global level, a large amount of aluminium was produced in June. According to data from the International Aluminium Institute (IAI), global aluminium production was 175.8 thousand tonnes per day, slightly up on the previous year and on a par with the previous month. So far this year, it has been increased every month (compared with the previous year). China continued to dominate the picture with a production share of about 57%. With its immense production capacities, the country is mainly responsible for the fact that global production did not decline during the Corona crisis. According to IAI data, 32 million tonnes of aluminium were produced in the first half of the year, 1.2% more than in the same period last year. China was also the production driver in this period. If the production rate is maintained in the coming months, more aluminium will be produced in 2020 than in the previous year. Even the record level from 2018 is still within reach.

However, the large amount of aluminium is not needed at all. For example, the Secretary General of the IAI expects a 5.4% decline in global demand for aluminium this year. He is therefore still conservative: other market observers see demand falling much more sharply. Starting from China, the global aluminium market should therefore also be oversupplied. In the medium term, the IAI Secretary General believes that the demand outlook for aluminium is more positive again due to (partly state-supported) investments in infrastructure, the construction industry and the automotive sector. In our opinion, the current oversupply is not at all reflected in the aluminium price. Although the price has fallen somewhat in the last few days and has slipped below the technically important 200-day line, the price is still in the black. However, at around USD 1,670 per tonne, it is still unjustifiably high.

Source: Commerzbank Research, Photo: Fotolia

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