⏫ALUMINIUM jumps 2.5%

4:22 PM 27 June 2023

Chinese stimulus hopes are lifting industrial metal prices but outlook remains blurry

Aluminium prices jump to almost $2,200 per tonne amid hopes for a bigger stimulus in China, what also drove Chinese indices higher today. Strong gains can be spotted on nickel and zinc markets as well while copper lags behind and gains less than 1% on the day.

Aluminium and other assets that are closely linked to the situation in China gained following a speech of Chinese Prime Minister at the World Economic Forum in Beijing, China. He pointed that GDP growth in Q2 2023 should be higher than in Q1 and that additional stimulus measures should be announced in July.

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On the other hand, stormy clouds are gathering over industrial metals markets, including aluminium.

  • Supply issues from the previous year have been resolved. European aluminum output dropped 10% last year due to high energy prices but those problems should be absent this year
  • World Bank points that economic recovery in China this year will be mostly felt in services, like it was the case in Western economies
  • While Chinese housing market has stabilized, one cannot expect a quick recovery
  • World Bank expects a 10% drop in prices this year, and a small rebound in 2024
  • United States does not allow aluminium of Russian origin on its exchanges and some parties are also unwilling to accept deliveries of Russian aluminium from LME inventories. Currently, over half of LME stock is made up of Russian origin aluminium

On the other hand, one cannot rule out a stronger recovery in China, driven by housing market, or stronger sanctions on Russian, like ban on trading of Russia aluminium and removing it from LME inventories. Apart from that, weather may also lead to issues at mines.

It should be noted that ALUMINIUM has been trading at the lowest levels since last fall as recently as yesterday. We may soon observe 200-session moving average breaking below 50-session moving average, what would be a bearish signal. One should also pay attention to yuan volatility- should yuan recover against US dollar, for example because of more dovish Fed, ALUMINIUM could jump. Nevertheless, it looks like ALUMINIUM rally may be short-lived at the moment.

Source: xStation5

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