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Aluminum Price Surges for Second Successive Day, More Gains Likely

Aluminum Price Surges for Second Successive Day, More Gains Likely

Martin Essex, MSTA,

Talking Points

- The price of aluminum topped $2,000 per metric ton for the first time since 2014 Tuesday.

- Strong demand and supply cuts in China are behind the metal’s strength, which could well continue.

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The price of aluminum, which is used in the production of steel, rose above $2,000 per metric ton Tuesday to its highest level since 2014 on reports that China is curbing supplies of the metal at a time when demand remains high.

In late London trading, the price was more than 2% higher at just under $2,014, up fromjust $1,907 in early business Monday.

Chart: Aluminum 15-Minute Timeframe (August 7-8, 2017)

Chart by IG

According to the Reuters news agency, China’s Shandong province has ordered 3.21 million tonnes of smelting capacity to be shut, more than previously expected, as Beijing intensifies efforts to curb pollution in its bloated heavy industries. Earlier this year, China ordered steel and aluminum producers in 28 cities to slash output during winter as it fights smog; last week, the key steel-producing area of Tangshan and other parts of Hebei province said they will implement the order, Reuters reported.

At the same time, figures show that Chinese exports of unwrought aluminum and aluminum products were down 4.3% in July from the month before. This comes at a time when global demand remains strong, although worries have begun to emerge about a potential slowdown in Chinese economic growth.

Meanwhile, from a technical perspective, the break to the upside suggests the price could now reach the highs of $2,078.75 touched in November 2014 and $2,119.50 reached in August the same year. On the downside, this year’s lows between $1,846 and $1,863 reached in March, May and June should provide support to the downside.

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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