Price analysis on the aluminum market: May 15-22

The weakening of the US dollar and the reduction of aluminum stocks in China, amid the increased risks of shortages of bauxite ore from Guinea, contributed to the growth of exchange prices for aluminum. At the end of the week, the market’s increased concerns about the increase in US government debt, the growth of inflationary pressure, amid the discussion of a new law on tax cuts, put negative pressure on metal markets. Prices were adjusted downwards.
The price of aluminum on the London Metal Exchange LME fell by $35 per ton compared to last Thursday, to $2,445 per ton. The average aluminum quotation for the week fell by $13 per ton, to $2,457 per ton, Translom reports.

China Market
In Asia, the main news was the reduction of the key rate in China, as well as the reduction of deposit rates by the largest state-owned banks, in the context of the implementation of state aid to the economy and the easing of monetary policy. The measure is expected to help stimulate domestic demand and credit growth. Notably, the National Bank of China cut the one-year lending rate (LPR) by 10 bps to 3% and the five-year lending rate by 10 bps to 3.5%. Most new and outstanding loans in China are based on the one-year rate, while the cost of mortgages is affected by the five-year rate. Both are currently at their lowest levels since 2019.

In terms of the impact of fundamental factors on the metals market, aluminum supply in China is approaching its peak. At the same time, insufficient hydropower recovery in Yunnan Province has exacerbated the aluminum supply shortage in the region, limiting the growth of aluminum ingot production.

Also, the market has increased the risk of shortages of bauxite supplies due to the revocation of a mining license in Guinea, which led to the suspension of production at some mines. These concerns potentially contribute to higher commodity prices. Assessing aluminum demand this week in China, we note that seasonal weakening of metal consumption and trade uncertainty associated with the increase in export tariffs in the United States are exerting pressure.

At the same time, aluminum ingot stocks have decreased, and limited liquidity in the spot market is supporting metal prices. In the short term, we expect volatility in aluminum prices due to the influence of multidirectional factors.

US Market
The Fed’s statements on the future model of monetary policy influenced the metal market. The head of the Fed noted that the impact of tariffs on price increases is obvious and indicates a longer wait before making any decisions on interest rates, until there is certainty about whether the increase in inflation is fleeting or has a more long-term nature. This caused a weakening of the US dollar and contributed to the growth of aluminum prices.

Aluminum Stocks and Futures Data
Aluminum ingot stocks in China, as of May 22, fell by 16,000 tons compared to the previous week, to 585,000 tons. According to aluminum stocks data on the LME from May 21, metal stocks fell by 10,000 tons over the week, to 389,000 tons.

Aluminum futures quotes on the LME fell by $57 per ton compared to the previous week, to $2,468 per ton. Futures for June on the Shanghai Futures Exchange were at $2,892 per ton.

Source: Translom