Last week, the price of aluminum hit a new three-year high as concerns about supplies from China, which is the world’s top producer of the metal, increased after the Xinjiang region in the country began imposing output curbs on smelters.
For example, last Friday, benchmark aluminum on the London Metal Exchange had increased by 1.5%, hitting almost $2,670 by noon. Earlier in the session, prices had gone up to $2664.50, which is the metal’s highest price since April 2018. On the Shanghai Futures Exchange, the price of aluminum set a new record, with the last time prices had gone that high being August 2008. An aluminum trader is quoted, noting that the significant increase in price was caused by output limits in China, which were mainly imposed in an attempt to cut down on emissions.
Calculations show that the monthly curbs imposed on the smelters in the Xinjiang region equal a 10% decrease in output from the levels recorded during January through July of this year. Xinjiang is a major smelting hub in the country, making up roughly one-fifth of supply in China, which is the world’s largest consumer and producer of aluminum.
The restrictions on the electricity usage of smelters in various regions are also impacting the domestic supply of the metal in China, which is in turn encouraging imports, with numbers showing that in the first seven months of this year, imports had grown by more than 45%, compared to the same figures from 2020.
The price of aluminum also increased earlier this week after a huge fire hit an alumina refinery in Jamaica, prompting concerns over disruptions in supply.
Thus far, aluminum has surged by more than 30% on the London Metal Exchange, driven by the global economic recovery.
With regard to reserves, China stated that it would be releasing another batch of metals from its reserves on Sept. 1, 2021, as part of its current campaign to control prices and avert commodities inflation from affecting growth.
Also on Friday, the National Food and Strategic Reserves Administration stated that it would be selling 30,000 copper tons, 50,000 zinc tons and 70,000 aluminum tons. These quantities are in line with its July metal auctions.
According to a report from the Shanghai Metal Exchange, China decided not to sell metals in August due to a jump in COVID-19 cases. To date, the state’s reserves has released roughly 270,000 tons of the aforementioned metals as part of its pledge to control its markets.
The direction of the price of aluminum is likely to favor industrial and base metals extractors such as First Energy Metals Ltd. (CSE: FE) (OTCQB: FEMFF) because high prices often translate to a better return for company investors.
NOTE TO INVESTORS: The latest news and updates relating to First Energy Metals Ltd. (CSE: FE) (OTCQB: FEMFF) are available in the company’s newsroom at https://ibn.fm/FEMFF
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