[Asia Economy Reporter Hyungsoo Park] Raw material-related stocks are collectively showing strong performance. The combination of US-China conflicts, carbon neutrality efforts, and the Ukraine crisis has caused instability in major raw material prices, which appears to have stimulated investor sentiment.
As of 2:28 PM on the 14th, PJ Metal is trading at 5,600 KRW, up 12.4% from the previous trading day.
Aluminum prices have reached their highest level since 2008, while prices of grains such as wheat and corn are also fluctuating. Analysts suggest that the Ukraine crisis is fueling price increases amid ongoing supply-demand imbalances. According to Bloomberg on the 8th (local time), aluminum futures prices on the London Metal Exchange (LME) rose 1.7% from the previous trading day to $3,186 per ton. During the session, prices surged as much as 3.3% to $3,236 per ton. This marks the highest level since 2008, approaching the all-time high of $3,380.
The Ukraine crisis is a key factor driving aluminum price increases. The US and Europe are preparing economic sanctions against Russia, which has hinted at a possible invasion of Ukraine. It is expected that Russia’s major aluminum producer Rusal will be included in the corporate sanctions list. Concerns over aluminum supply disruptions are intensifying, further driving up prices. Russia is the world’s second-largest aluminum producer after China. Excluding China, Russia accounts for 13% of global aluminum production.
The rise in natural gas prices due to the Ukraine crisis is causing secondary supply disruption concerns across the raw materials market. As natural gas prices increase, electricity costs rise, leading raw material companies unable to bear production costs to reduce output one after another. Slovak aluminum smelter Slovalco announced plans to cut aluminum production by about 60%, citing rising electricity costs. Dutch aluminum producer Aldel has already reduced aluminum production since October last year due to increased production costs from higher electricity prices.
It is estimated that aluminum production disruptions in Europe have already exceeded 800,000 tons. In China, aluminum production disruptions due to large-scale factory shutdowns caused by power shortages at the end of last year are estimated to be close to 3 million tons. Amid this situation, aluminum demand is increasing as consumption recovers mainly in developed countries and automakers expand electric vehicle production.
Goldman Sachs has raised its 12-month aluminum price forecast to $4,000 per ton. Goldman Sachs diagnosed that aluminum demand in developed countries is unusually high amid production disruptions in China and Europe. Aluminum inventories stored in LME warehouses stand at 767,700 tons, the lowest level since December 2006.
PJ Metal recorded sales of 246.2 billion KRW and operating profit of 25.2 billion KRW last year, increasing by 92.1% and 290.8% respectively compared to the previous year. Net profit rose 289.3% to 18.5 billion KRW. The company explained that the improved performance was due to increased sales from rising aluminum prices and cost competitiveness secured through strategic supply-demand management.
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