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Soaring energy prices have prompted a wave of aluminum capacity cuts across Europe as smelters reel from sky-high gas and power prices while demand remains soft due to concerns about global economic growth, Standard Chartered said in a commodities report this week.
Cutbacks and curtailments to Europe’s aluminum capacity began in October last year as power prices started surging. Since the end of 2021, cuts have been announced at smelters in Spain, Slovakia, Romania, the Netherlands, Slovenia, Montenegro, Norway, and a number of smelters in Germany, Standard Chartered noted. Over the past week, a 50% production cut was announced at the Neuss smelter in Germany and a 22% cut at Europe’s largest smelter in Dunkerque in France.
Despite the capacity cuts, aluminum prices are falling, reaching a 17-month low this week after hitting a record high in March this year at the start of the Russian invasion of Ukraine. This, according to Standard Chartered, is a reflection of the mounting fears of recession and a recovery in Chinese aluminum production, which is largely offsetting capacity cuts in Europe.
“A combination of weak demand owing to slower growth and China’s production gains is likely to cap near-term price upside,” Standard Chartered said.
Due to the high energy costs, the European metals industry this week called on the EU for emergency action to prevent a collapse of the sector which faces an existential threat from surging power and gas prices.
In a letter to the top EU officials, including European Commission President Ursula Von der Leyen, the European metals industry association Eurometaux wrote that “the business leaders of Europe’s non-ferrous metals industry are writing together to raise the alarm about Europe’s worsening energy crisis and its existential threat to our future.”
As much as 50% of the EU’s aluminum and zinc capacity has already been forced offline due to the power crisis, Eurometaux said in the letter. Significant curtailments have also been made in silicon and ferroalloys production, and further impacts felt across the copper and nickel sectors, the association added.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.