aluminium is no lightweight

not too long ago, in the 19th century, aluminium was so precious and hard to obtain that its price was higher than that of gold. nowadays its not quite a comparison that can be made with a straight face, but the former’s price hitting a 13-year high and threatening to set a new all time record might prove enough for them to be compared with a sly smile. among other things, this caused the shares of aluminium producers in India — Hindalco Industries and National Aluminium Company — to rise 2.2% and 3% respectively on February 9.

is it time to put on a tin foil hat?

China at the centre

have you ever heard of the Butterfly Effect, in which a small change in one state of a deterministic nonlinear system can result in large differences in a later state? or in simple words, a butterfly flapping its wings in one part of the world causing a tornado weeks later in another? well, that is sort of what’s at play here.

China, the world’s largest producer of aluminium with over half the global supply, is hosting the Winter Olympics. along with the global tournament comes a lot of media coverage and eyeballs. so in order to reduce pollution and increase air quality during and after the tournament, it imposed bans and restrictions on many aluminium smelters. that is because these smelters consume large amounts of electricity which is mostly produced using coal-based sources. this resulted in a lowering of output of Aluminium and consequently its price began to rise.

meanwhile, another large producer, Russia was also spooking the market over its escalating tensions with Ukraine. so when the major aluminium producing hub of Baise in the Guangxi region was placed into lockdown after reporting Covid cases for three consecutive days, the situation exploded.

while China adopts a zero tolerance policy towards Covid-19, other major components of the global economy differ. so their resumption of economic activity continues and the demand for aluminium for its desirable properties of being non corrosive, heat resistant, lightweight, and so much more only grows. unless the output grows again, we just might see the metal’s prices continue to set new records for a while, and carry with it the prices of aluminium stocks.