9 August 2022 – The annual production capacity for Chinese aluminium is capped by law, and producers are on the verge of breaking the mark. What then? Demand for aluminium remains very high worldwide. Stocks on SHFE and LME are threatening to run out in the next few months. And already now the probable additional demand in the next few years amounts to 50 to 60 million tonnes of aluminium.
China: Aluminium close to legal capacity limit
As part of a national programme to eliminate overcapacity in energy-intensive and polluting industries, China set a production capacity ceiling of 45 million tons of aluminum per year a number of years ago. We have undoubtedly reached “peak production” in China under present policy since the country’s capacity has expanded to 44.3 million tons and is currently functioning at an astounding 92 percent utilisation rate.
Aluminium inventories at historic lows
Stocks on the two major commodity exchanges, the LME and SHFE, have been in the headlines again and again for months with news of new lows.
LME aluminium sold out in three months?
Aluminium inventories on the LME are declining by an average of 100,000 tonnes per month. If this trend continues without significant increases in inventories, the LME will be sold out of aluminium in October or November.
SHFE aluminium inventories halved since June 2022
At the same time, stocks on the SHFE are falling at a similar rate. Since the beginning of June 2022, SHFE inventories have de facto halved. If the decline continues at the same pace as in recent months, SHFE stocks will be empty by the beginning of October.
And this despite expanded production and pandemic-related interruptions in Chinese production.
Renewable energies need raw materials
The strong increase in demand for wind and solar power plants is cited as one of the main reasons why aluminium is becoming increasingly scarce, especially in Asia. China wants to double its solar capacities in 2022 alone. By 2030 the IEA has forecast an increase in solar and wind energy in China to 1.2 terawatts.
Is the big aluminium squeeze coming?
The additional global demand for aluminium for solar and wind power alone is estimated at about 40 to 50 million tonnes by 2030. Experts are not yet sure where this aluminium will come from. Especially if the Indian economy has to add its probable additional demand of up to 16 million tonnes per year.
Study: Netherlands will need 33 million tonnes of metal
The Netherlands alone will need up to 33 million tonnes of metal in the next few years. Steel, aluminium, copper and nickel account for 94% of the total. Europe and the EU do not have sufficient production capacities or reserves of important raw materials such as nickel and rare earths.
Emerging countries with growing demand for raw materials
Industry experts see a growing demand for raw materials needed in the defence, aviation and transport sectors. Emerging economies, such as Indonesia and India, but also in Brazil and Mexico. In the European Union, too, many member states are waiting in the wings to outstrip older and more sedate states.
IMF Study: Up to three billion tonnes of metals
Up to three billion tonnes of metals are needed for conversion to renewable energies. Shortages of silicone, molybdenum, nickel and vanadium will hit battery metals particularly hard. In order to reduce CO2 emissions to zero by 2050, share of renewable energies must increase from the current 10% to 60%.
Pressure on Western lawmakers and legislation must increase
While China is once again trying to lead the way in terms of green transformation, the West continues to block itself. Instead of quickly dismantling and streamlining outdated laws and regulations to adapt them to a new reality, policy makers in Europe are still stuck in old patterns.
The pressure on legislation must now increase further so that decisions can be made in the short term with regard to energy supply and the urgently needed expansion of renewable energies. Which will ultimately not only lead to a much-needed boost for the global economy, but will help to finally get the green transformation moving.
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Disclaimer: Many things here represent our opinion. Others are information from the Internet. We can therefore never claim to be correct or complete. And never base a business decision solely on the news you receive from us.
