Aluminium Prices are Set to Extend Gains in Coming Weeks After Likely Import Ban from Russia

Following significant declines through September, the prices of aluminium in October emerged stronger than other metals. The prices did a turnaround this month compared to the bottom lows during September's end. If the prices resume breaking out of range upward, it will imply the ending of the downtrend amidst building bullish sentiment. However, regardless of the current bounces, the long-term macro downtrend momentum will likely continue adding pressure to the index.

From September to October, the Aluminum Monthly Metals Index (MMI) declined by 8.04 percent, with all components plunging.

Global Physical Delivery Premiums in Collapse

The physical delivery premiums worldwide persist in heading downwards from their respective peaks. These premium measurements remain precise of primary aluminium supply with regard to demand. So, the falling premiums indicate weakening demand.

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According to reports, Japanese aluminium buyers have agreed to pay USD 99/tonne in premium for October-December shipments. This offer is lower than the initial ones from producers regarding the prices of aluminium, ranging from USD 115/tonne to USD 133/tonne. This is the fourth straight quarter of decline.

Undoubtedly, the latest figures are below 33 percent, behind the USD 148/tonne spent between July and September. This is also less than USD 220/tonne, which is 55 percent lower than the previous peak during the 2021 quarter four. As Japan is the largest aluminium importer in Asia, the premiums bargained by Japan will be set as the benchmark for the entire region. As of recently, the demand from Asia has emerged to be more resilient compared to Western Europe. Yet, the resumed decline of the quarterly premium of the Japanese Port hints that demand is also sinking there.

On Thursday, prices of aluminium were all set to extend gains after a report implied that the U.S. would be banning Russian imports, whilst gold remained steady before the due data on key U.S. inflation.

On Wednesday, aluminium traded in London closed above 5 percent following the reports that the Biden administration is taking into consideration that the imports of aluminium from Russia will be banned as a comeback to the military escalation in Ukraine by Moscow. The move came as a result of Russia engaging in a string of destructive missile strikes in Ukraine this week as a form of retaliation for destroying the bridge connecting Russia and Crimea.

However, no formal decision has been made on the matter by the White House. Regardless, the possibility of a tight supply witnessed the price mark of aluminium at its best in almost a week. But, similar to most industrial metals, aluminium is also down this year due to the looming fears of a possible global recession.

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This article by Procurement Resource concludes that aluminium prices are expected to be higher than other industrial metals as the imports from Russia will be cancelled due to its invasion of Ukraine. Within Asia, Japan's benchmark prices for aluminium metals will be followed by other nations seeing that Japan is the largest importer of the metal in the region.