Not the news one likes to hear when investing in extractive sectors/metal producers
Aluminum climbed as investors weighed fresh signs of pressure on production, with Alcoa Corp. planning to shut a European smelter and Beijing vowing to cut carbon emissions from China’s huge army of aluminum smelters.
The metal closed in Shanghai at a two-month high, and rebounded in London. Alcoa will halt a Spanish plant for two years amid soaring energy costs in Europe. In China, the government said it wanted carbon emissions from the aluminum industry to fall 5% in the first half of this decade.
Both developments highlight how aluminum’s supply is at risk of tightening into next year and beyond as the energy-intensive industry faces higher costs and more climate regulation. Citigroup Inc and Goldman Sachs Group Inc. are among banks that forecast a deeper deficit in 2022. Prices in London are up more than 40% this year.
An energy crisis in Europe over the past few months has piled pressure on metals producers, especially in aluminum where power accounts for a large portion of costs. Alcoa’s announcement on the San Ciprian plant came soon after production cuts at the top European smelter.