The aluminium market is experiencing renewed optimism driven by stronger fundamentals and a shift toward sustainability according to recent analysis from BMI, a Fitch Solutions company.
BMI has adjusted its 2024 aluminium price forecast upwards from $US2400/tonne to $US2450/tonne, as demand growth is expected to outpace supply, creating a supportive environment for higher prices.
Prices recently closed at $US2650/tonne in October 2024, marking a 13.5 per cent increase year-to-date and underscoring a positive trend for the industry.
BMI forecasts that demand for aluminium will grow by 3.2 per cent year-on-year in 2024, reaching 70.35 million tonnes (mnt).
A key factor behind this uptick is the expansion of clean energy technologies, particularly in China, which has become a significant consumer of aluminium for electric vehicles (EVs) and renewable energy infrastructure.
Notably, aluminium demand in China’s EV sector grew by 31.4 per cent in the first nine months of 2024, but this steady demand from the green energy sector is likely to counterbalance weaker performance in traditional aluminium-consuming sectors, such as construction and manufacturing.
Meanwhile, the supply side of the market is tightening due to recent disruptions, in October, Guinea, a leading source of bauxite, suspended exports from its major aluminium producer, GAC.
Similarly, Australian and Chinese supply chains have faced operational constraints, adding pressure on aluminium’s raw materials and impacting global smelters. BMI suggests these developments will likely increase input costs, presenting an upside risk to aluminium prices into 2025.
Global economic developments are adding to aluminium’s positive outlook. China’s recent stimulus efforts and the US Federal Reserve’s anticipated rate cuts have bolstered market sentiment.
Although the US dollar has strengthened lately, the Federal Reserve’s projected monetary easing could weaken it in the longer term, supporting commodity prices.
Looking ahead, BMI expects aluminium demand to remain robust, supported by increased usage in construction, automotive, and renewable energy sectors.
The shift to EVs and clean energy technologies is anticipated to increase aluminium intensity, driven by its light-weighting potential, which is essential for extending EV range.
Renewable energy sources like wind and solar also require high aluminium volumes for infrastructure.
BMI forecasts that aluminium prices could peak at $US2900/tonne in the second half of this decade, as green economy initiatives continue to propel demand.
Moreover, China’s cap on smelting capacity and environmental regulations could further limit global supply growth, adding further upward pressure on prices.
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