Spurred on by a drop in inventories and an expected surge in demand, aluminium futures rose at the Shanghai Futures Exchange to their highest level since the end of October on Monday.
With data showing that aluminium inventories in Shanghai’s warehouses fell to a nadir of 665,067 metric tons, which was the lowest point since November 2017, traders sent aluminium prices to CNY14,200 (US$2,115.36) per metric ton by the end of trading yesterday.
The significance of yesterday’s prices was profound, as it was the first time in over four months that the value of a metric ton of aluminium garnered at least CNY14,000, which is generally seen as the Middle Kingdom’s break-even point on aluminium.
CRU analyst Jackie Wang said that the rise in prices may be more than just a one-off.
“(The second quarter) should be a strong demand season, so this would probably give aluminium price a bit of support. Macro data released last week is kind of strong, much better than expectations for GDP and also real estate.”
However, many investors will continue to tread lightly due to uncertainty surrounding what, if any, help Beijing will offer its country’s construction sector, which is a significant mover for aluminium prices.
“We still think demand growth in 2019 will be slower than 2018,” cautioned Wang.
Another wild card in the aluminium game is the effect imported scrap aluminium may have upon the domestic market. The China Nonferrous Metals Industry Association said on Saturday that regulators would begin accepting applications for importing otherwise-banned metals late next month, but details as to which metals and what volumes would be permitted were not immediately forthcoming.
Beijing banned the import of certain scrap metals late last year, bolstering the fortunes of primary aluminium smelters under the gun of international authorities on allegations of subsidized flooding of the global aluminium market.