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GRAPH-Demand destruction fears to dominate aluminum market

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By Pratima Desai

LONDON, September 28 (Reuters)Abundant aluminum supplies and weaker demand due to slowing growth will push the market into surplus despite production cuts in Europe and China due to electricity problems and consumers shunning Russian metal .

Analysts say the result will be a longer-than-expected price decline for the metal widely used in the energy, construction and packaging industries.

Aluminum CMAL3 on the London Metal Exchange at $2,100 a tonne is down nearly 50% since hitting a record high of $4,073.50 a tonne in March, when worries about disruptions in the Russian supplies due to the war in Ukraine have driven prices up.

Some aluminum consumers in Europe are rejecting aluminum from Rusal, which has reportedly raised fears of shortages and higher prices, with the Russian producer accounting for around 6% of global supply.

Smelters in China’s Yunnan province have cut production due to power rationing. However, China’s aluminum imports in August fell 19% from a year earlier, partly reflecting record domestic production.

“While we expect further smelter shutdowns in Europe by Q3 2023, the market is more concerned about demand destruction,” said Citi analyst Wenyu Yao.

“High electricity prices and high interest rates threaten to undermine industrial production and hurt aluminum consumption.”

Citi expects a surplus of 804,000 tons in 2023.

Meanwhile, consumers destocking aluminum can be seen in the physical premiums paid over the LME benchmark.

Premiums paid in the United States at $540 per ton AUPc1 have fallen 30% since April, while in Europe the figures stand at $425 per tonne EPDc1 are down 30% since May.

“The market is well supplied right now, it shows in inventory,” said Bank of America analyst Michael Widmer, who expects the aluminum market to post a surplus of 879,000 tonnes this year. year.

Widmer expects global aluminum consumption to fall 0.1% to less than 68.6 million tonnes this year and supplies to rise 2.4%.

Aluminum stocks POOR-STOCKS in LME-approved warehouses at 335,625 tons are up 25% since hitting 32-year lows of 271,450 in August, while those monitored by the Shanghai Futures Exchange are up 20% since inception August to reach nearly 210,000 tonnes AL-STX-GHS.

LME Aluminum Pricehttps://tmsnrt.rs/3ftHMaN

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(Reporting by Pratima Desai; editing by Jason Neely)

((pratima.desai@thomsonreuters.com; +44 207 513 5681;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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