Shanghai aluminium prices dropped almost 4% on Wednesday to their lowest in nearly six months, hit by China’s weak property data and rising warehouse inventories.
The most-traded January aluminium contract on the Shanghai Futures Exchange declined as much as 3.7% to 18,280 yuan ($2,863) a tonne, its lowest since May 26.
Stockpiles of the metal, widely used in construction, transport and the making of consumer goods, rose to their highest since June 4 at 307,779 tonnes.
The earlier surge this year in aluminium prices is starting to provoke a supply response from the rest of the world, Morgan Stanley researchers said.
China accounts for 57% of global aluminium supply and previously exported 5-6 million tonnes annually. To achieve its carbon neutrality goals, however, China has capped capacity at 45 million tonnes this year.
World aluminium output rose by 2.5% to a record 65.3 million tonnes last year.
“We expect the country to become a net importer in 2022 if energy controls persist,” Rachel Zhang, managing director of basic materials, metals and mining equity research, at Morgan Stanley in Shanghai, said.
The cost of power for producing aluminium in China is up 50% this year, Zhang added.
“This is the result of rising coal prices for captive power, the removal of preferential power prices, and a new policy that sets no upper limit on power prices for energy-intensive industries,” she said.
Morgan Stanley raised its 2022 and 2023 price forecasts by 3% and 6% respectively.
“Longer term, we increase our real price forecast by 5%, from $2,050 per tonne to US$2150 and our nominal forecast by 7%, from $2,335 to $2,474.”
- Reuters, with George Russell