China: The demand for base metals like Aluminum and Copper is currently facing a tightening supply, with mining capacities failing to keep up. China is expanding its EAF capacities for Steel, which is likely to increase the demand for scrap. However, the political and economical clashes might be clouding the actual demand-and-supply scenario in the market.

For the past few months, Chinese Aluminum smelters located in the primary production provinces have maintained high-capacity utilization rates. In March, the utilization rate stood at 96 to 100% and further capacities are expected to ramp up in April. The high-capacity utilization rates of smelters indicate a potential for further recovery, making the demand for Aluminum a critical aspect of China's economic development.

Half of the smelting capacities, equalling 1.2 million MT, have been closed by Aluminum producers in Europe during the energy crisis. As per our sources, the smelters may remain shut for a while, citing the need for repairs and subsequent technical work to start them immediately being impossible. This shutdown could potentially cause a shortage of supply. Additionally, the Chinese economy, which has shown a growing demand for Aluminum, is emptying stocks quickly, further adding to the concerns. In case Chinese smelters also experience a reduction in production because of energy shortages, it could inevitably lead to a surge in Aluminum prices.

According to our sources, there is no sign of improvement in the future. By 2040, it is predicted that the global demand for Copper will rise by nearly 60%, while mining capabilities will only increase by a maximum of 16%. This will likely result in limited inventory of Copper, a crucial base metal that serves as a key indicator of economic growth.

Chinese steelmakers are moving towards the development and construction of Electric Arc Furnaces (EAFs), which are central to green Steel production. A leading Steel company in China has nearly 10 million tons of EAF capacity already in use and is preparing to augment production capability with additional EAFs. This wave of conversion and focus on EAFs is projected to increase demand for scrap in China, which in turn may cause a scarcity of the resource. The introduction of the EU Carbon Border Tax CBAM is expected to intensify the global Steel industry's pursuit of scrap as a green raw material.

As base metals continue to soar in popularity and the focus shifts towards eco-friendly commodities, it begs the question: why are media outlets still discussing potential recessions? Could it be that political and economic conflict is obscuring the true state of supply and demand in the market?