European Aluminium Ingot Production Curtailments Persist at the end of Q1 of 2023

In the European market, the Aluminium Ingot prices witnessed mixed sentiment this week amidst the bank instability and the tight markets. According to market participants, concerns about Aluminium Ingot supply tightness continued to shape premiums in Europe. Over the past two years, the production capacity of European Aluminium Ingot curtailed by roughly 50% owing to skyrocketing energy and power costs, further dwindling producers' margins. Major players claim that the Aluminium Ingot production cuts continued even as power costs fell. Despite all the production capacity being taken offline, Aluminium Ingot prices have yet to recover.

According to our sources, more than 1 million metric tons of annual Aluminium Ingot capacity has been cut off from the European Smelter due to rising power costs since Q4 2021. Additionally, the power costs fell significantly in Q3 2022 and early Q1 2023, and the German power prices fell by roughly 70%. Despite falling prices, power costs remained higher in the European market than they were in 2021. Coupled with this, the Slovenian Talum will ramp down its leftover Aluminium furnaces in April 2023. Manufacturers claim that despite falling energy prices, producers' margins are still not adequate. Aluminium Ingot prices have not recuperated enough to salvage manufacturer margins as they fell by roughly 15% this year from January 2023 highs.

Amidst the ongoing production cuts, the traders cite that the latest production curtailment of Aluminium Ingot and Aluminium related products is due to the structural shift of primary production and not due to power costs. Speira's fresh cuts may have been attributed to high power prices, but the company has been transitioning to a pure Aluminium rolling and recycling company. Furthermore, the Talum's stoppage was likewise hung on power prices, but the smelter was only operating at 20% capacity because of earlier cutbacks.

Thus, ChemAnalyst expects Aluminium Ingot prices to showcase mixed market momentum in the coming weeks as the resumption of Aluminium smelting capacity comes at a high cost, and the power crisis has exacerbated the structural shift. Additionally, there is a limited chance of restarting operations at those curtailed Aluminium Ingot smelting units. On the demand side, the European Aluminium Ingot market currently shows an improvement because of its curtailed supply picture. As a ripple effect, the Aluminium Ingot prices will further depend on demand if buyers successfully get inventories from the new location at lower costs.