Brent Crude recovers slightly from history lows

As the price of oil drops a huge 5.2% today alone (20th April 2020), after regaining some of the lost ground from the weeks before, it begs the question – even with APEC’s intervention – what will happen to oil prices in the weeks to come?

  • Will we see these historic low prices passed onto the consumer?
  • Will the reduction in cost result in an increase in oil consumption?
  • Will the price of oil climb once demand rebounds after most countries around the globe come out of their lockdowns?

All off these are important questions to ask, but from our point of view, we see the imploding price of oil – especially Stateside – being a major concern for Aluminium as a whole.

Why?

Well, it’s quite simple. A lot of consumers directly or indirectly use oil. A lot of by-products of the oil industry feed smelters, which create steel, iron, copper or in our case – Aluminum. Petcoke comes directly from the oil industry (petroleum coke), which is used to manufacture electrolytic anode. These anodes are used in the smelters, to create alumina.

This then leads onto the main process, which uses roughly 0.45t of anode to produce 1t of aluminum.

Its a lot of number crunching – but you can quickly see that if consumption of oil is reduced, barrels are left unsold, then factories, smelters, refineries and the end consumer could potentially see prices affected in multiple industries due to the situation caused by COVID-19 and the oil price crash.

Where does it leave us?

It could lead us to seeing fluctuations in the petcoke price, calcined coke, coal tar, coal tar pitch, aluminium flouride and many other essential raw materials for the carbon and aluminium industry.

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