The aluminum price continues to form an upward trend amid strong demand.
Problems with aluminum production in China due to power disruptions could lead to serious metal shortages. Lower production levels will outweigh weak growth in consumption and will lead to a significant rise in aluminum prices.
The closure of European steel plants due to high electricity prices and the refusal to import aluminum from Russia make the problem of a possible global shortage especially urgent.
At Shanghai Stock Exchange (SFE) inventories, aluminum reserves have fallen by 12% over the last month. London Metal Exchange (LME) metal inventories decreased by 5% over the last 2 months.
Aluminum smelting in China will grow at a slower pace compared to forecasts. The reason goes behind the electricity regulation in Yunnan and some other provinces, where aluminum is mostly smelted using hydroelectric power.
Bank of America analyst Michael Widmer predicts an aluminum deficit. He believes the main reasons for this situation are the energy deficit for China's steel plants and the growing demand for the metal. According to Widmer's forecasts, the aluminum market expects a deficit of 1.53 million tons this year. In 2024, the metal shortage will grow to 1.93 million tons.
Metal shortages due to production problems in China and plant closures in Europe and Russia could lead to higher aluminum prices due to deficits in the global market. In addition, the reduction of inventories at the Shanghai and London metal exchanges indicates the high demand.
After the price went beyond the downtrend on the H4 time frame, the price corrects at the upper boundary of the range 2257 - 2433.
On the H1 timeframe the price is in the formation of the third ascending wave. Breaking through the top of the first wave at 2433 strengthens the upside signal. At the same time, the level of 2433 is a key resistance, overcoming which will require strong fundamental data.
Signal:
The short-term prospects for aluminum - buying.
The target is at the level of 2500.
Part of the profit should be fixed near the level of 2433.
The stop-loss is at the level of 2365.
Bullish trend has a short-term character, so the volume of trade should not exceed 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
