Aluminum Prices Rise, but European Giant Frets Over Chinese EV Influx

Key Points:

  • Norsk Hydro, a major aluminum producer, is concerned about the increasing number of Chinese-made electric vehicles being imported into Europe.
  • European carmakers may struggle to compete with the lower prices of Chinese EVs, which could impact the demand for aluminum.
  • The price of aluminum has experienced a downturn, partially due to Hydro closing a smelter in Slovakia and the uncertainty surrounding China’s annual production cap.
  • China exported $13.1 billion worth of EVs to Europe in the first seven months of 2023, a slight decrease from the previous year.
  • American EV makers, including Ford, General Motors, and Tesla, have also faced challenges and indicated plans to pause manufacturing expansion.

Who isn’t playing the China card in Europe? The answer is Norsk Hydro, a major aluminum producer. While the price of aluminum has seen some improvement in recent months, it is still far below its peak in early 2022. In the midst of this, Hydro faced additional challenges when it closed a smelter in Slovakia due to surging energy prices caused by Russia’s invasion of Ukraine. On top of that, there is always the uncertainty of China’s annual production cap, currently set at 45 million tons. With these factors in mind, Hydro now finds itself worrying about the impact of increasing imports of Chinese-made electric vehicles on the European market.

As more Chinese-made EVs make their way into Europe, there is a concern that European carmakers may struggle to compete with their lower prices. This could ultimately lead to a reduced demand for aluminum, as the metal is used to help reduce the weight of battery pack casings in EVs. Hydro’s CEO, Hilde Merete Aasheim, expressed this worry in an interview with the Financial Times, stating that if European automakers start reducing their demand for aluminum due to being outcompeted by Chinese-made EVs, it would pose a threat to Hydro.

The West Eating its Own

Chinese aluminum manufacturers may also face their own demand hit if the recent somberness out of their US EV maker customers is any indication. American automakers like Ford, General Motors, and Tesla have all announced plans to pause their manufacturing expansion, citing factors such as affordability and concerns about charging infrastructure and driving range. Ford recently reported a $1.3 billion loss in its EV division, and even Elon Musk, the CEO of Tesla, mentioned that the company would consider market conditions before opening a factory in Mexico. These developments do not bode well for Chinese aluminum manufacturers, who rely on the success and demand for EVs in the global market.

In summary, Norsk Hydro is increasingly concerned about the potential impact of Chinese-made EVs on the European market. The influx of these vehicles could lead to European carmakers struggling to compete, thus reducing the demand for aluminum. Additionally, American EV makers facing challenges may also affect the demand for aluminum globally. These uncertainties pose risks for Hydro and underline the interconnectedness of the global automotive and aluminum industries.

Hot take: It’s no surprise that Norsk Hydro is worried about the increasing number of Chinese-made EVs entering the European market. The lower prices of these vehicles could pose a threat to European carmakers, potentially impacting the demand for aluminum. With the ongoing challenges faced by American automakers as well, the global aluminum industry is facing a period of uncertainty. Balancing competition, production capabilities, and market demand will be crucial for all players involved. Only time will tell how the aluminum market will adapt to these changing dynamics.

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