Aluminum Prices Volatile as Shanghai Stocks Climb, LME Retreat

Aluminum prices had yet another volatile week. On Friday aluminum was trading just a few dollars lower at $1940, caught in the tight range of $1936-$1964. Support was at $1885 and resistance at $1978. The biggest movement for aluminum this week was on Wednesday when prices soared to a fresh high of $1958 but then quickly reversed and closed below $1900.

This volatility is exactly what Rio Tinto Group’s aluminum boss said he expects for the aluminum market in an early April interview with Bloomberg. According to Alfredo Barrios, prices will be “extremely” volatile, due to the uncertainty over when China will curb production. Earlier in the year, China said it would cut back aluminum production as part of the country’s plan to curb emissions.

This week, supporting prices was the inventory draws from London Metal Exchange warehouses, but a rise in Shanghai stocks on Friday limited this bullish sentiment. Still, overall LME holdings are sitting at just 1.7 million tons. Inventories in Shanghai, meanwhile, are at their highest in about a year. Another positive factor, this week, Vedanta’s 500,000-ton aluminum smelter in India lost power – causing damage to 228 out of 608 pots, according to Reuters. The supply chain impact of this will be long lasting. It takes time to repair the damaged pots, with current estimates for a loss of roughly 30,000 tons of aluminum production over the next three months, equivalent to about 25% of the plant’s quarterly production.

Meanwhile, according to Reuters China’s total March aluminum production rose to 2.707 million tons from 2.534 million in February. Aluminum production typically picks up in pace as spring approaches, tracking the seasonal pick-up in construction demand.

Leia Toovey has a B.Sc. in geology from Simon Fraser University, and her degree had a focus on resource economics. Out of school, she started working in the booming mining industry of Vancouver, Canada, covering junior mining stocks and commodities including potash, copper, nickel, oil and gold. Then she moved to New York and worked as a commodities analyst covering a breadth of commodities, from the Baltic Dry Index through the softs. As a geologist she has a greater understanding of the exploration and extraction side of commodities, and how changes in technology and the depletion of resources impact pricing. At Economic Calendar she covers a variety of commodities, providing daily technical and fundamental analysis and assessing major market developments.