Aluminum prices are rising due to numerous concerns about supply problems, including capacity cuts in China for environmental reasons, the energy crisis in Europe and potential sanctions against Russia, according to Carsten Menke, head of the Next Generation research group at Julius Baer Bank.

As of 15.15 Moscow time, aluminum rose in price by 0.9% to 3.254 thousand dollars. Quotes for the second day in a row updated the maximum since 2008.

While prices for most industrial metals remain below the highs set last year, the expert notes, aluminum quotes are striving to achieve a new record. Since mid-December, prices have risen by almost 25%, exceeding the mark of $ 3200 per ton and approaching the levels of 2008.

“The engine behind the resumption of the “rally” is the numerous supply concerns that are reinforcing the extremely bullish market sentiment. Compared to last year, the market remains concerned about capacity cuts in China for environmental reasons. While Chinese production has been declining over the past few months, metal volumes both domestically and exported have been rising recently, suggesting there is no shortage,” Menke said in a statement.

Another problem, in his view, remains high electricity prices in Europe, which has forced some producers to announce capacity cuts.

“In addition, Europe is an important export destination for Russian aluminum, and in light of growing tensions around Ukraine, the aluminum market seems to include in the price an increased risk of sanctions against Russia. Such sanctions could wreak havoc on the interconnected global aluminum market as they would stop not only the flow of refined metal from Russia, but also the flow of raw materials such as bauxite or alumina to smelters and refineries,” Menke said.

As an example, he cites the supply of bauxite to alumina refineries in Ireland or Jamaica, which are owned by Russia’s largest aluminum producer and which would be cut off from the market in the event of sanctions. “Due to the reduced supply on the aluminum market, imposing such sanctions today would be highly inadvisable. Such a decision could lead not only to a significant increase in aluminum prices, but also to further disruptions in the supply chain that would go far beyond the aluminum market,” the expert concluded.