China’s dubious economic conditions likely to affect the aluminium market

China’s uncertain economic situation is likely to hang heavy over the non-ferrous metals sector in 2015. The country is one of the largest consumers and producers of non-ferrous metals and its decision to re-balance economic growth from an investment-focused one to a consumption-oriented one has upset demand-supply balances.

It has not helped that the other emerging markets, too, are seeing slower growth, while Europe’s growth continues to disappoint. Moreover, capacities that were planned in the years when the prices were high are coming on line at a time when demand is flagging. Despite all these factors, non-ferrous metals such as zinc and aluminium were better off in 2014.

Copper has had a bad year, in comparison, aluminium and zinc prices did better with their prices rising by around 5% and 4%, respectively, in the year. Aluminium metal premiums have been rising steadily during the year as buyers have been forced to pay extra for quicker deliveries. Higher prices have helped the margins of domestic firms.

In aluminium, reacting to weakening demand conditions, companies have been shuttering unviable capacities. A tighter supply market has supported prices and metal premiums. While zinc and aluminium had a good year in 2015, there’s no saying for sure that it will continue next year, too. If China’s economic growth continues to slip and its appetite for non-ferrous metals declines, then some impact on prices should be expected.