Aluminium outlook - Q3 2021

The medium-term outlook for aluminium will be shaped by the energy transition, rising and volatile power costs and continued growth in demand. Over the short-term, we think supply will become increasingly price inelastic as power rationing and restrictions limits smelter output growth in China. With the capacity cap in China only a few years away, future output growth will become a function of higher utilisation rates. In the rest of the world, as high carbon fuel sources such as coal are removed from electricity generation without a one for one replacement from renewables at the same price, we are likely to see cost inflation for smelters. This is already taking shape in Europe.