The reality of the metal sector and of the aluminium segment


The Italian industrial system is going through a strengthening period due to the Coronavirus outbreak: trade business is banned and the industrial activities are at risk because the contagion spread must be limited in order to prevent serious impacts on the medium-term growth outlook of the Italian economy.

Mario Conserva, Director of the Allumino & Leghe magazine, Secretary General of FACE (Federation of Aluminium Consumers in Europe) and President of METEF highlights some crucial aspects of the metal processing, especially for what concerns the aluminium industry.

How have the metal markets been affected? What’s the outlook for the aluminium sector?

Coronavirus has hit all markets and weakened the quotations of non ferrous metals. The outbreak hit China first therefore the immediate impact on raw materials was inevitable since China is the global leading producer of primary aluminium as well as the largest imported of copper, zinc and nickel.

Copper listings at the London Metal Exchange dropped from USD 6,300 per ton in mid-January to the current USD 5,300 while HG aluminium decreased from USD 1,800 to USD 1,670. Hydro and Rio Tinto are the sole primary aluminium producers in Italy having announced capacity reductions ranging from 15% to 20% but they made no mention of the health emergency underway.

Low LME quotations are challenging for several European smelters. According to a CRU estimate, 13 of these plants accounting for a primary aluminium capacity exceeding 1.8 million tons are likely to apply capacity reductions or closures. On the global market in 2019 China produced 36 million tons of primary aluminium out of the 64 million tons worldwide.

This emergency has generated many unknown variables: will China go on producing primary aluminium even though its domestic market will absorb a much smaller portion than in the past (the assessed drop in the Chinese industrial production is over 13%)? If the reply is in the positive as it seems, the Asiatic giant might flood the market with high carbon footprint aluminium right when other global leading producers such as Rusal and Hydro are opting for green production from low carbon footprint water power.

Last but not least, will China continue producing aluminium semis, a minimal portion of which will be absorbed by its domestic market and the rest being dumped in higher quantities on the global market? The reply to all these questions will only come in the next few months.

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