'Aluminum Prices Hit 13-Year High Amid Power Shortage Impact'

Skim Milk Powder Prices Reach Highest Level in 7 Years

[Image source=Yonhap News]

[Asia Economy Reporter Park Byung-hee] Aluminum prices have soared to their highest level in 13 years due to the global energy crisis. Analysts say that aluminum prices are rising sharply because it is a metal that consumes a lot of electricity during production.

According to Bloomberg on the 11th (local time), aluminum futures prices on the London Metal Exchange (LME) surged by up to 3.3% to $3,064 per ton. Bloomberg explained that this is the highest level since July 2008, driven by concerns over reduced supply of energy-intensive aluminum due to power shortages.

Aluminum is a metal that requires as much as 14 megawatt-hours (MWh) of electricity to produce 1 ton. 14 MWh is the amount of electricity an average UK household can use for more than three years.

As aluminum prices rose, LME copper prices also increased by 1.9%, and zinc prices rose by 2.5% to $3,230 per ton on the same day.

Since it is uncertain whether the power shortage can be resolved in the short term, the outlook is that aluminum prices will continue to rise.

Dutch aluminum producer Aldel announced that it would reduce aluminum production starting this week due to increased production costs caused by rising electricity prices. In this situation, the European Union (EU) Commission announced that it plans to impose anti-dumping duties on Chinese aluminum rolled products due to unfair trade practices. However, the Commission explained that the duties will be applied starting from July next year after a nine-month grace period.

Mark Hansen, CEO of Concord Resources, a commodity brokerage firm in London, UK, predicted that aluminum prices could rise to $3,400 per ton within the next 12 months. Recently, purchases of call options with a strike price of $4,000 per ton have increased in the options market. A $4,000 call option means the buyer can exercise the right to buy only if the price reaches $4,000 per ton, making a profit. In other words, purchases are being made based on the expectation that aluminum prices will rise to $4,000 per ton.

Meanwhile, prices of skim milk powder have also soared to their highest level in seven years due to reduced milk production. On the same day, skim milk powder futures prices rose to 135 cents per 100 pounds, the highest since August 2014.

Prices are rising sharply as exports from New Zealand and Europe, the world's top two dairy exporting regions, have decreased. This could lead to price increases for milk, butter, and cheese in the future. Bloomberg reported that butter and cheese producers are increasingly demanding exporters to expand domestic supply.