A POSSIBLE RECOVERY
The Italian aluminum sector and, in particular, the semi-finished products sector has recorded a consistent recovery starting from July 2020, which then consolidated in the last months of the year, leading to decreases around 5%, much better than what was expected during the hard lockdown months.
The general sentiment among market operators is currently positive, thanks to good order coverage and a total recovery in productivity, which was initially thought to be related to the accumulation of past orders, but which instead seems to be continuing, taking the form of a real recovery.
The most marked declines affected production linked to the automotive sector and, to a lesser extent, to the building sector, which, however, in recent months has seen an increase in demand for semi-finished products, thanks above all to the "Superbonus 110", a new law aimed at relaunching the construction sector.
The trend is different for those companies whose production is destined for the packaging and pharmaceutical sectors, which have recorded positive values throughout the year, both because there has been no interruption in activity as they are linked to basic needs, and because of the drop in imports from China.
According to data collected and processed by Assomet, the Italian production of semi-finished aluminum products in 2020 consolidated at 1,177,000 tons produced, with a negative change of 4.4% compared to 2019.
The extruded sector recorded a 5.1% decrease compared to 2019 values thanks to the strong recovery in the second half of the year, in spite of the forced closures related to the health emergency and despite having started 2020 with widespread uncertainty among operators, coming back from a 2019 already in decline. National production of extrusions thus stands at 566,300 tons (597,000 in 2019). Apparent consumption of extrusions in Italy stands at about 415 thousand tons, -2.6% compared to the values of the previous year. The decrease is more contained as exports have recorded a more marked decline than imports, due to the difficulties of the historical moment we are experiencing for trade. Imports of extruded products should stand at about 72 thousand tons (at the moment Istat data are available until November 2020), with a reduction of about 4%, while exports should exceed 220 thousand tons (-9%), highlighting the importance of foreign markets for this sector.
As regards the production of aluminum rolled products, the drop did not exceed 4.3%, due to the difficulties experienced by the transport sector, while packaging and pharmaceuticals, as already described, continued to drive the sector even during the most critical months of the pandemic. National production amounted to 583,100 tons.
In this case the reductions are more marked for both imported and exported quantities, which should stand at 285 thousand tons (-13%) and 305 thousand tons (-14%) respectively. Apparent consumption is thus down by 3%, with 565 thousand tons of rolled products used in Italy.
Another fundamental sector of the Italian aluminium market, that of foundry bars, contrary to semi-finished products, has not recovered the strong reductions recorded in the lockdown months: national production stands at 570,300 tons, with a drop of 18%. Domestic consumption, however, registers a heavier reduction, around 27%, as a substantial amount of foundry breads was exported outside Italy: exports are in fact up around 8-10% compared to 2019 (around 290 thousand tons). Imports, on the other hand, record a 19% drop, with about 160 thousand tons.
Aluminum prices experienced two very different periods in 2020, influenced by the evolution of the health emergency. From the beginning of the year until the height of the pandemic, aluminum prices on the London Metal Exchange (LME) experienced declining quotations, collapsing to $1,421 (the lowest in more than four years) in April. Then, in the second half of the year, thanks largely to reopenings and the unexpected economic boom in China, aluminum reversed course, reaching its highest point of $2,051 in December.
By the end of 2020, aluminum premiums were also sharply higher in the U.S., Europe and Asia, with strong demand and shortages of scrap outside of China supporting a further increase in demand for the metal.
Demand for base metals in China increased as a result of significant government investment to stimulate the economy, primarily targeting real estate and infrastructure. This has led to strong increases in imports, from bauxite (+14%), to alumina (+205%), but also alloy breads, or secondary aluminum ingots: imports have increased from 219,000 tons in 2019 to over one million tons in the first 10 months of 2020. Italy alone exported about 70,000 tons of alloy breads to China in January-November 2020, compared to a value of 4,000 tons exported in the same period of 2019, evidence of the Asian giant's strong demand for the metal. Conversely, scrap imports fell, mainly due to new rules governing the entry of scrap and waste into China.
The same trend is showing up in this early 2021, with continuous overtakes of LME quotations of aluminum alloys on High Grade quotations, both steadily above $2,000 since mid-February.