Oversupply concerns are putting downward pressure on aluminum prices

MetalMiner is the largest metals media site in the United States, according to third party ranking sites. With an active global perspective on issues, trends…
In May, aluminum prices outperformed all other non-ferrous metals, rising 5.28%. On May 29, prices reached their highest level since June 2022 and then gave up all of May’s gains in the first three weeks of June.
Concerns about copper shortages sparked renewed interest in the market a few months ago. This had an indirect impact on the non-ferrous metals category, causing an upward trend that lasted for about three months. However, despite copper prices rising to previous all-time highs, as of May, global markets showed no clear signs of copper shortages. Meanwhile, the Fed has taken no action to address interest rates, which continue to weigh on demand. Although inflation has begun to cool, it remains above the Federal Reserve’s interest rate target of 2%.
In late May, investors seemed to have noticed the reality of the current market, and when copper prices peaked on May 20, the speculative rally began to fade. Meanwhile, aluminum prices continue to rise, ultimately reflecting the downward trend in base metal prices. The end of the month. Since peaking, prices have fallen nearly more than 9% and are currently at their lowest levels since April 9. They are still looking for a new bottom.
Aluminum prices reacted slowly nine days after copper prices peaked as investment funds continued to build long positions. Their large positions have a huge impact on price direction. However, the sell-off began in June when funds left the market, leading to a further decline in net long preferences.
The end of China’s dry season could pose even more problems as aluminum prices continue to fall. Due to heavy rain, Yunnan’s hydroelectric power plant was damaged, and steel mills resumed production. Data from China’s National Bureau of Statistics showed output hit a two-year high in May, up 7.2% from 2023. That rise is likely to continue, with output expected to rise by another 330,000 tonnes in June, according to Bloomberg Intelligence. New metallurgical plants are returning. if (window.innerWidth
News of a manufacturing boom in China comes after a huge increase in inventories on the London Metal Exchange (LME). Records show Trafigura dumped more than 400,000 tonnes of aluminum in warehouses, much of it coming from India. While the trader may be looking to profit from rent-sharing deals as loading queues grow due to heavy shipments, Trafigura’s ability to unload such large volumes suggests there is plenty of aluminum circulating in the market. In short: global oversupply.
Questions remain about China’s ability to consume increased aluminum supplies. Problems in the real estate sector and disappointing factory output data are raising many warning signs about China’s appetite. At the same time, Western countries continue to increase protectionist measures against China’s overcapacity, creating another problem for Chinese manufacturers.
In mid-May, the White House raised tariffs on some Chinese goods, including aluminum and electric vehicles. The White House fact sheet notes that “China has also flooded global markets with artificially low-priced exports.” American products will be undercut by artificially priced, higher-emitting Chinese alternatives.”
In 2024, tariffs on certain types of aluminum products, including sheets, slabs and foil, will increase from 0-7.5% to 25%. It’s also important to note that these new tariffs will be set on top of Section 232 tariffs. At the same time, tariffs on electric vehicles, which also require large amounts of aluminum, will increase from 25% to 100%. In June, the European Commission followed suit and imposed tariffs of up to 38.1% on Chinese electric vehicles from July 4th.
The extent of the impact of the new tariffs on aluminum imports into China remains to be seen. While Chinese aluminum makes up a relatively small share of total U.S. imports, its share has risen sharply as aluminum prices have risen in recent months.
MetalMiner is the largest metals media site in the United States, according to third party ranking sites. With an active global perspective on issues, trends…
The materials provided on this site are for informational and educational purposes only and are not intended to provide tax, legal or investment advice.
Nothing contained on this website should be construed as a recommendation, offer or solicitation to buy or sell securities to any person in any jurisdiction.