Yamal-Europe Pipeline Stopped Transporting Natural Gas

SHANGHAI, Jan 5 (SMM) - Recently, Russia's natural gas supplies to the Europe through the Yamal-Europe pipeline have dropped to zero. Russian officials explained that it is because the country is actively stockpiling natural gas domestically to ensure the heating supplies. SMM believes that the deeper cause lies in the European Parliament’s stopping to support for Russia's Nord Stream 2 project.

The cut-off of supply by Russia has led to a new round of natural gas price hikes in Europe, which in turn has led to a spike in electricity prices in Europe. The energy crisis in Europe is intensifying, and multiple aluminium smelters in the Europe have decided to reduce or suspend their production, when taking into account the high electricity prices and rising financial pressures, according to SMM research. As of now, Europe has suspended the production equalling to a combined capacity of 800,000 mt/year. If the natural gas supply problem cannot be solved, energy prices will continue to go up. In other words, there is likely to be more production cuts in the Europe.

In the short term, LME aluminium gained strong support from the production cuts in Europe caused by energy shortage. And China has been minimally affected for the moment. SHFE aluminium carried some upside momentum amid ow domestic inventory.

In the long term, LME aluminium inventory in the Europe is likely to keep falling, hence there will be a supply deficit, combined with the broad production cuts, which may lead to more imports of aluminium or aluminium semis to make up for the supply shortage. China, as an aluminium power, will see opportunities in the exports for aluminium semis, supporting the downstream demand.