Aluminum quotes recorded a new 7-month low last week. For now, it is not possible to consolidate strongly below the level of 2200, the Friday's rebound brought the price back to higher levels. However, today the aluminum market is dominating the selling with one more attempt to break through the 2200 level. The stubbornness of the "bears" could lead the quotes to the range of 2100-2160 in the near future.
According to the management of India's Hindalco Industries, uncertainty about China's economic recovery is putting serious pressure on the metallurgy industry. Despite the fact that production will be supported by the energy transition in the long term, industrial metal prices are declining right now. Low demand in China forces local producers to export aluminum to other countries, which results in additional price reductions in the global market.
Currently, there is no oversupply in the aluminum market, but investors are concerned about its occurrence in case of a decrease in metal imports to the Chinese market and a simultaneous increase in exports. This factor is putting downward pressure on the metal price. Recovery of demand for aluminum may cause a significant rise in prices, but it is unlikely to happen until the second half of the year.
Benchmark Mineral Intelligence (BMI) in London has lowered its estimate of the average cost of aluminum this year from $2600 to $2500 per ton. Decline in global demand for the metal and increased production in China influenced the revision of the forecast. China already provides more than half of the global aluminum supply. This year, BMI experts expect Chinese companies to increase metal production by 2.2% compared to last year, to 40.9 million tons.
The next downside target for aluminum prices is the October low around 2160. After they are reached, the way to the lowest levels of last year, just below 2080, will be opened.
The following trading strategy option can be suggested:
Sell aluminum in the 2200-2220 range. Take profit – 2160. Stop loss – 2250.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.
