European aluminium and aluminium alloy producers have been seeing a strong demand from carmakers and original equipment manufacturers (OEMs) until now in 2021. But some market participants fear a dip in demand as auto sales continue to run below pre-pandemic levels. They also forecast a significant fall in aluminium premiums later this year.
When markets started reviving after the COVID-19 related lockdown restrictions in the latter part of 2020, automotive companies were among the main drivers for aluminium and aluminium alloys demand and remained so in 2021. Aluminium premiums and prices also rose consistently.
LME aluminium benchmark prices traded at above US$2,400 per tonne through the early part of June so far, having ended 2020 at below US$2,000 per tonne. To sustain this high price and premium throughout the rest of this year would require consistently robust demand. So, aluminium suppliers are worried about the weak auto sales.
New passenger car registrations in Europe rose 218.6 per cent in April on the year to 862,226 units, but this was still about 300,000 units below April 2019 levels. Passenger car registrations in January-April reached 3.4 million units, up by a quarter from 2020 but still below 2019.
However, despite this, demand for aluminium and aluminium alloys among carmakers and the OEMs supplying them has remained strong so far this year. Some analysts suspect this strength has buoyed the market’s belief that high long-term demand is not likely to materialise without far better auto sales numbers.
Also, the belief has been bolstered as boosted car sales post lockdown restrictions have become weaker, fostering an impression of tight, rampant markets.
A shortage of electrical semi-conductor – another consequence of the pandemic – has hit a number of markets and forced some automotive companies to pare back production in recent months.
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