UOB bank
June 2019
Global consumption of aluminium has been rising over the years. This is likely to continue on the back of healthy demand from Asia as well as from the increased use of aluminium in the automobile and aerospace industries. Consequently, global demand for aluminium is expected to exhibit growth of between 2.0% to 3.8% per annum from 2019 to 2024, equivalent to an increase from the current 60 million (mn) tonnes to almost 72 mn tonnes by the end of the period.
Over the past year, global supply of aluminium was disrupted by both sanctions and tariffs. As a result of the supply risk arising from these events, countries such as China, India and Vietnam have stepped up to increase their exports to the other parts of the world.
Concerns over supply disruptions, sanctions and tariff have also triggered volatility in aluminium price over the past year. There is potential upside risk as tightening fundamentals keep prices buoyant while previous supply disruptions add to price spikes. Over the medium term, we expect aluminium prices to remain supported as the market remains in deficit.
China, as a crucial participant in the global aluminium industry, has continued to implement supply-side reforms. Overcapacity in the sector is being reduced by stricter environmental regulations and closing down of illegal capacity. This poses downside risks to near-term aluminium production. Nonetheless, China will still remain as the dominant aluminium producer in the world who accounts for more than half of global output in the years ahead.
Consumption-wise, the country is slated to slow down on the back of sliding growth in automotive and construction completions. Meanwhile, 2018 marked the year of a sharp increase in Chinese export of aluminium products.
New technologies in consumer electronics, defence systems, the rise of electric vehicles (EVs) and associated battery storage are slated to boost demand for certain metals including aluminium. Specifically, the rise in the number of EVs will be a great boost to the demand of these metals moving forward.
To support the growth of companies in this sector, UOB is able to offer bespoke solutions to companies operating in the aluminium sector value chain. For more information, please contact us here.
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