BMI, a unit of Fitch Solutions, is making a minor downward revision to its aluminium price forecast for the year to an average of $2 500/t, from the previously forecast $2 600/t.
In its outlook for aluminium prices, the unit says prices will likely remain under pressure this year, with no return to 2022 highs, as global demand remains weak and domestic supply increases in Mainland China (the world’s largest aluminium producer), despite disruptions in Yunnan.
Despite this, BMI expects to see prices improve from current levels later in the year as China’s real estate sector makes a recovery.
In the longer term, the unit expects aluminium prices to remain elevated, as demand is supported by the accelerating shift to a green economy, while supply remains constrained.
On the demand side, BMI notes that prices are under pressure in response to a slower-than-anticipated recovery in Mainland China’s manufacturing sector and weak domestic consumption.
Outside of China, demand from the global construction, packaging and auto sectors will remain weak on the back of a grim global macroeconomic outlook, BMI points out.
As a result, it expects aluminium demand in developed markets to see fairly muted growth over the year, before rebounding in 2024.
On the supply side, BMI expects Mainland Chinese production to climb 2.2% year-on-year to 40.9-million tonnes this year compared to a 2.8% rise in 2022.
Stocks are expected to remain tight over the year compared to historical levels, despite waning demand, as China’s non-manufacturing sector continues on its growth trend.
Longer term, aluminium prices in 2024 are expected to average $2 700/t, above the 2023 average, as demand rebounds in response to the easing of inflationary pressures, BMI says.
Beyond that, it expects prices to peak at $2 900/t in the second half of the decade as aluminium demand is supported by the acceleration of the green energy transition.
Beyond 2025, BMI expects to see limits to Chinese production growth, helping to narrow the global aluminium surplus.