## Aluminum Prices Poised for a Surge: Goldman Sachs Predicts Significant Hikes
Get ready for soaring aluminum prices. That’s the prediction from investment banking giant Goldman Sachs, who anticipate significant price hikes due to an impending inventory shortage. This shortage is expected to be driven by the global shift towards renewable energy and electric vehicles, both of which heavily rely on aluminum.
Goldman Sachs sees a tightening market, with demand outpacing supply. They estimate that prices on the London Metal Exchange (LME) could hit $4,500 per metric ton in 2024, further climbing to $5,000 in 2025. To put this into perspective, LME aluminum traded around $2,650 per ton on Thursday.
According to Goldman Sachs, “The estimated China GDP boost to prices is significantly larger for metals than for oil and coal largely because of China’s dominant share in global metals demand.” This highlights the immense impact China’s growing demand has on the global aluminum market.
Australia Raises Concerns About Aluminum Shortage
Goldman Sachs isn’t alone in its concerns. Australia, a top aluminum exporter and the world’s largest bauxite producer, has also expressed worries about the aluminum market. Earlier this month, the Australian Aluminum Council urged the government to add aluminum, alumina, and bauxite to the country’s critical minerals list. This would ensure long-term industry support and policy incentives.
The council’s CEO, Marghanita Johnson, stated that while aluminum is currently on Australia’s strategic mineral list, it lacks the necessary policy support. She warned, “We do not want aluminum to become the new nickel.” Johnson emphasized the urgent need for action to prevent a repeat of the nickel industry’s challenges, which saw a significant exodus from the continent, resulting in job losses.
Australia’s aluminum sector faces mounting challenges, including rising capital and energy costs, labor shortages, and lengthy regulatory approvals. Johnson pointed out that environmental permit delays exacerbate these issues, hindering the industry’s ability to meet escalating demand. “One of the greatest cost increases expected over the next five years will come from delays in environmental approvals, limiting access to bauxite for our alumina refineries,” she said.
Price Volatility in the Aluminum Market
While the recent aluminum price surge on the LME has eased, this doesn’t mean the market is out of the woods. October contracts have fallen to a discount against later-dated contracts following a period of intense selling. This price volatility was partly triggered by Trafigura’s aggressive positioning in the aluminum futures market, which led to a strong backwardation — a premium on near-term contracts.
However, if Goldman Sachs’s predictions of tightening inventory levels are accurate, we could see similar episodes of price volatility arise in the future. This situation highlights the delicate balance and potential for disruptions in the global aluminum market, which is crucial for various industries and the transition to a green economy.