• Goldman Sachs bullish on commodities
• Imminent supply shortage
• Aluminum price forecast raised
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After the Russian attack on Ukraine, aluminum prices climbed above $3,700 in March 2022, setting a new record high. This was due to the fact that the natural gas supplies from Russia, which are so important for aluminum production, were interrupted as a result. But this high was initially followed by a deep slump due to slowing growth in the global economy. In the meantime, however, the price of the silvery-white light metal has recovered somewhat and has risen by around 20 percent in the past three months to currently 2,608 US dollars per ton (as of February 2nd, 2023).
China’s production at record levels
The feared energy crisis in Europe has prompted many aluminum manufacturers there to cut back their production. For example, a large smelter in Slovakia was recently closed for good. But on the other hand, China, which accounts for almost 60 percent of global production according to the IAI, increased its aluminum production by 4.5 percent to a record high of a good 40 million tons in 2022 thanks to the commissioning of new capacities.
“With weaker domestic demand, China exported a lot of aluminum last year and compensated for the production weakness in other regions. This year, rising demand in China is likely to give prices a boost, Commerzbank analyst Barbara Lambrecht wrote in “Raw Materials News”.
Goldman Sachs upbeat
According to Bloomberg, Goldman Sachs is also assuming that the price of aluminum will continue to rise in 2023. It said in a statement to customers that the industrial metal is likely to rise in price to an average of $3,125 a ton in London trade this year. The investment bank’s analysts are now significantly more optimistic than they were with their previous forecast, when they only expected an average price of $2,563.
In their view, the price of aluminum could even be as high as 3,750 US dollars in twelve months’ time. The Goldman Sachs experts see higher demand in Europe and China as a price driver, which could lead to a shortage of supply.
Commodities strong overall
Like many other Wall Street banks, Goldman Sachs is bullish on the entire commodity sector. According to the bankers, a lack of investment in recent years has meant that there is now only a small supply buffer. Now that the Chinese economy is reopening after long corona restrictions and the global economy is likely to pick up speed again in the second half of the year, Goldman Sachs believes that the commodities asset class could generate returns of over 40 percent in 2023.
“You can’t imagine any more bullish conditions for commodities at the moment,” quotes “Bloomberg” Jeff Currie, Head of Commodities Research at Goldman Sachs. The prospects for commodities in 2023 are better than for all other asset classes, the expert explained with reference to a perfect macroeconomic environment and raw material inventories at a critically low level.
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