FxWirePro: Supply factor – a constructive driving force for base metal, more upside traction likely

It has been an eventful days for the aluminum market in the recent past, with aluminum headlines easily swamping updates from CESCO copper week.

The week started with market participants digesting the likely impact of additional US sanctions placed on Russian individuals and companies.  This was followed by news on Tuesday that Albras would curtail 50% of its aluminum production, or around 230 kmt/a.

The week started with market participants digesting the likely impact of additional US sanctions placed on Russian individuals and companies.  This was followed by news on Tuesday that Albras would curtail 50% of its aluminum production, or around 230 kmt/a. The sanctions came as an enormous surprise to a market still reeling from the final US Section 232 tariffs announcement only roughly a month earlier. Given the supply risk from the week’s headlines, 3M LME aluminum prices are up close to 15% since last Thursday (4/5).

Moreover, spot MW premiums— currently the most reflective regional premium for supply risks, given the recent US tariffs—have risen from a range of between 17.5 c/lb and 19 c/lb last week to more than 21 c/lb currently.

LME prices and global premiums would have to rise to a level to account for China's 15% primary aluminum export tax on top of all the other arbitrage factors (SHFE/LME price differential, shipping etc). This could send all-in prices more than $200/t to $300/t higher from here. Courtesy: JPM

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