Aluminum prices dropped to a seven-day low this week after a brief rally last week, due in part to expectations that Chinese smelters are jump-starting output, which would add to the abundant global supply that has put downward pressure on this market segment.
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“Following a surprising first quarter jump in aluminum prices it appears Chinese producers are restarting their production to take advantage of these higher prices,” wrote Donald Levit of Economic Calendar. “If Chinese producers production increases materialize and add to the market supply, we can expect to see a correction in aluminum prices.”
Aluminum has confounded us and other analysts as, up until this week, it had led a rally in industrial metal prices. However, it lacked the fundamental drivers for such a rally despite the production cuts and improved Chinese economic data.
Says our own Raul de Frutos: “The long-term outlook for aluminum is still poor. Aluminum will likely need a bull commodity market to make a substantial rally. Prices in the short term could rise, however, following the recent strength in the base metal sector and the fact that bargain hunters might want to lift prices after the slump seen last year.”
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