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Aluminum Industry Sees Recovery as Trimet Plans Production Increase

Trimet Aluminium SE to ramp up production amid falling energy prices, signaling recovery in Europe's aluminum industry.

By Athena Xu

5/16, 10:07 EDT

Key Takeaway

  • Trimet Aluminium SE plans to fully ramp up production in France and Germany by mid-2025, targeting 540,000 tons annually as energy prices fall.
  • Aluminum prices dropped 1% to $2,571.50 a ton on the LME following the announcement, amidst predictions of a 6% price decline over six months due to returning supply and high interest rates affecting demand.
  • The global aluminum supply is increasing with smelters restarting production; however, weakening consumption outside China may lead to price corrections between $2,100 and $2,400 per ton.

Aluminum Industry Recovery

Trimet Aluminium SE has announced plans to increase production at its smelters in France and Germany to full capacity by mid-2025, aiming for an annual output of 540,000 tons. This decision comes as a response to the easing of the energy crisis that had severely impacted the European aluminum industry, leading to more than half of the regional capacity being taken offline due to soaring power prices. The cost of electricity, a critical factor in aluminum production, has now dropped to about a quarter of the metal's price, making production economically viable again. This shift is attributed to a significant decrease in electricity prices, with benchmark German power falling 32% in the past year, nearing the five-year average.

Market Response and Price Trends

Following Trimet's announcement, aluminum prices on the London Metal Exchange (LME) fell by 1% to $2,571.50 a ton, reversing earlier gains. The metal has seen a rally of more than 8% this year, driven by an improving demand outlook, particularly in sectors like construction. However, Henry Van, a metals analyst from Trafigura Group, predicts a 6% drop in aluminum prices over the next six months. This forecast is based on the return of supply to the market and the impact of high interest rates on manufacturing demand. Van describes the current demand picture as "very grim" and considers the recent price rally as "fundamentally overdone."

Supply Adjustments and Global Demand

The anticipated price correction to a range of $2,100 to $2,400 per ton is expected due to weakening consumption, especially outside of China. The increase in aluminum prices has encouraged smelters to restart curtailed production, adding to the supply. This is evidenced by record restarts and a significant delivery of aluminum onto the LME, which doubled total stocks to over 1 million tons, reaching the highest level since 2021. Despite these adjustments, the broader metals market is experiencing varied trends, with copper prices falling and tin prices climbing, indicating a complex interplay of supply and demand across different commodities.

Management Quotes

  • Trimet Aluminium SE:

    "Relaxed conditions in procurement markets and, notably, decreased electricity prices have now made it economically viable to produce aluminum again."