What caused a 40% plunge in aluminium futures on the LME from last year’s peak? And what lies ahead for the metal?
Aluminium is an important metal used in many sectors like aviation, automobiles, railways, and electronics. Its market value is influenced by global economic conditions and significant world events, which can lead to price fluctuations.
Lately, aluminium prices have been going down. In this article, we will find out why that’s happening and what are the predictions for its prices going forward.
Let’s get started!
What’s Happening?
There has been a big drop in the price of aluminium futures on the London Metal Exchange (LME). The price of these aluminium futures has fallen by almost 20% since it was at its highest in January.
And if we look back at last year’s highs, the drop is even bigger, with aluminium futures down by over 40%. This shows that aluminium prices have taken a major tumble compared to last year.
A steady decline in aluminium prices can be clearly seen.
You might be curious about why aluminium prices are falling. Well, there are several factors at play here. It is a mix of things causing this decline, including the volatility of the market, changes in supply and demand of aluminium, how the world economy is doing, and what is happening on a global scale that is affecting the prices of aluminium.
But right now, let us focus on the major reasons behind it. According to Moneycontrol, two big reasons behind the declining prices of aluminium are the economic weakness in Europe and America and the not-so-great demand for construction in China.
Another factor is that China’s businesses that use a lot of commodities (raw materials) are in a slow recovery phase, and the overall demand for aluminium in the world doesn’t look too bright either, according to research agency BMI.
In July, Chinese exports of aluminium products did not see an improvement, reflecting weak demand for aluminium products globally.
Impact of Decreased Aluminium Prices
A drop in aluminium prices can make a big difference in the aluminium industry. It affects everyone involved, from producers to the companies that use it and even customers. This price change can also influence product decisions, profit margins and investment strategies within the industry.
What’s Next?
Many aluminium producers and traders forecast an optimistic position in the medium term. They anticipate an increase in demand for aluminium, especially from manufacturers of electric vehicles and solar panels.
However, the global economy’s slow recovery is expected to dampen aluminium demand, with metal prices unlikely to recover this year after falling 6% since January, as reported by Business Line.
On a more positive note, a report from BMI suggests that aluminium prices are likely to rebound in the long term, driven by the ongoing transition toward a greener economy, even if the recovery is not expected to be immediate.
This shift toward environmentally friendly technologies, such as electric vehicles and renewable energy sources, is expected to bolster demand for aluminium in the years ahead.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
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