Aluminium is making waves...Again

After making gains of approximately +30% in 2024, Aluminium is continuing to progress, recently reaching a new 2-year high.

But why is Aluminium increasing in price, and is there more room to move?

Let’s take a closer look…

What exactly is Aluminium, and how is it produced?

Aluminum is a metal with a light silver metal colouring. It is malleable, corrosion resistance, thermally conductive and lightweight. Although its abundance in the earth’s crust is often mentioned, very rarely does Aluminium exist in this state on its own naturally.

Instead, Aluminium is produced from bauxite ore and is commonly mined in Australia, China and Guinea.

Due to the energy intensive process of converting bauxite ore into Alumina, and then into Aluminium, understandably, energy costs play a key role in the price of Aluminium. It is estimated that 25-40% of the cost of producing Aluminium is comprised of the energy it takes to complete the conversions.

Aluminium’s Use Case…

Aluminum is used for a wide variety of purposes including food & beverage cans, foils, mirrors, as well as in airplanes, electric vehicle components & solar panels.

Often, Aluminium is alloyed with other metals (magnesium, copper, zinc, silicon, tin, and manganese). The key appeal of Aluminum alloys is that they’re lightweight.

This ranks Aluminium highly therefore as a meaningful component to be used within aircrafts, spacecrafts, aquatic and Electric Vehicles to increase vehicle driving range through significant overall weight reductions.

Engineers and designers therefore are highly favourable of this metal due to reduce its ability to contribute toward lower emissions and increased fuel economy via reduced vehicle weight.

Aluminium Market Forecast…

According to Fortune Business, the global Aluminium market is prepped to grow at a CAGR of 6.2% between 2024 and 2032, expected to reach US $403.29 billion, with the greatest influence on such growth coming from the transportation sector across automotive, aerospace and marine industries.

The growing demand for electric vehicles is expected to be a key contributor to the increasing use of aluminium-tin alloys, driving growth of aluminium alloy sales into the future. It is tipped that the aluminium alloy market will hit US $327 billion by 2034.

China’s role in Aluminium

It is important to note the makeup of the worldwide Bauxite mining and production dynamics.

As previously mentioned, a large portion of worldwide Bauxite is mined in Australia, China and Guinea…However the majority of ore mined in Australia and Guinea is exported to China. Collectively, Australia, Guinea and China represent 72% of the ~400m MT of Global Bauxite production.

Therefore, it may be wise to keep an eye on China and the factors that influence the price of Aluminium, such as Chinese Energy costs.

Aluminium’s Big Run in 2021-2022…

Between 2021 to Early 2022, the price of Aluminium futures doubled, from $160 to $320, then settled at an average of about $205 for the entirety of 2023. So why the spike?

These were the key contributing factors during that period:

• Chinese government introduced anti-pollution policies

• Higher energy prices

This lead to significant constraints in China’s aluminium production, and since they are the dominant force in Aluminium production, this had a tremendous impact on the supply and price of Aluminium.

As China progresses towards cleaner (but more expensive forms of) energy, will energy production costs continue to affect the price of Aluminium in addition to increasing market demand for the material? We suspect so…

BullfinderAI Tech Reading…

Our Tech has rated Aluminium as bearish since early 2024, with current momentum rating remaining as ‘Bullish’ for now.

The team would like to note key price point of $215 - Should Aluminium futures decline beneath this level, bearish risk may come into play, and market factors may need to be reassessed.

How to get involved in Aluminium? Best Opportunities?

There are a number of instruments available from various providers, including:

• Aluminium ETF’s

• Aluminium Producers

• Bauxite Producers / Exporters

• Bauxite Miners / Explorers

As always, please do your own research and consult with your licensed financial professional before acting on any information contained within this article, as your personal circumstances have not been taken into account and may not be appropriate for you.

At time of writing, Aluminium futures currently sit at $255.95 USD

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