According to foreign media on February 21, global primary aluminum production rose 3.4% year on year to 5.836 million tons in January, according to data released Monday by the International Aluminum Institute (IAI).
The data also showed that global aluminum production rose only 2% to 69 million tons in 2022.
Aluminum prices are expected to rise this year amid supply disruptions and demand, particularly from China, industry analysts said.
Fitch Solutions Industry Research and Country Risk said in a report that it expected aluminum prices to rise, but not to the highs seen in 2022.
Goldman Sachs said in a report that it expected aluminum prices to surge further, while other analysts cited production cuts at some Chinese refineries and falling inventories of aluminum ingots in China as bullish signals.
Market participants expected global aluminum demand to rise in 2023, with consumption forecast to grow by 4.7 percent.
"We maintain our average 2023 aluminum price forecast at $2,600 per tonne, with our forecast suggesting prices will remain near current levels in 2023 due to ongoing supply constraints and an expected recovery in Chinese demand, which could boost demand," Fitch Solutions Industry Research and Country Risk said.
Goldman Sachs expected aluminum prices to average $3,125 a tonne in 2023, up from its previous estimate of $2,563 a tonne.
The investment bank expected aluminum prices to reach $3,570 a tonne in the next 12 months.
Europe's aluminium smelters face challenges
Goldman Sachs expected strong aluminum prices mainly because of "rising expectations of supply shortages due to increased demand from China and European countries."
European aluminium smelters still face challenges, according to ING Think, the financial and economic analysis arm of Dutch bank ING.
"We do not expect aluminum prices to rebound to their 2022 highs due to slowing global growth and weak demand outside China," Fitch Solutions said. That said, there are risks to our price forecasts as a strong industrial recovery in China will push aluminium prices above our current forecast levels."
Low inventory
On the supply side, U.S. research houses expected aluminum supplies from China and Europe to remain tight, which would provide additional support to prices as power issues continue to challenge production and energy costs continue to rise.
Norsk Hydro's statement said its 600,000 tons of aluminum capacity "remains at risk" if energy prices spike again, ING Think said.
Another reason Goldman expected aluminum prices to rise this year is that inventories are now at their lowest level in 21 years.
There are reports that the pace of growth in Chinese aluminium inventories has slowed.
Russian aluminum production may fall
A favorable macro environment, a weaker dollar and a slower Fed rate hike cycle could trigger price gains, Goldman said.
Fitch Solutions said European aluminium production would continue to be affected by higher energy costs. While production may not be hit as hard as it was in 2022, output growth is likely to slow in the short to medium term as refineries slowly come back online.
Analysts said Russian aluminium output would be hit by higher input costs related to sanctions.
Fitch Solutions expected Russian aluminum production to decline about 3 percent year on year in 2023.
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