June Aluminum Price Forecast: China Smelting Capacity Firing Back Up?

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Shiny aluminum ingots with a crane in the background while a plane is flying overAs aluminum prices have whittled away their May gains by the beginning of June, news from a Goldman Sachs report indicates Chinese aluminum output is about to get ramped up again.

Bloomberg recently reported that “with most producers in the world’s largest supplier [China] posting solid margins, output growth will accelerate to 4% year-on-year in the second half after contracting 1.7% in the first four months,” according to a Goldman report released Monday.

As capacity fires back up, “the bank sees prices dropping to $1,450 a metric ton in three months, $1,400 in six months and to $1,350 in a year, reiterating previous forecasts.”

However, we take some other factors into consideration.

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As my colleagues Raul de Frutos and Jeff Yoders have noted earlier this month, China exported 400,000 mt of unwrought aluminum back in April. This represents a year-over-year decline of 7.8%, supporting the argument that domestic demand has picked up there thanks to the stimulus effect. However, how robust and for how long that uptick is likely to last is extremely difficult to tell.

The sustainability of aluminum prices will still depend on this fluctuation in Chinese aluminum production and on how much China can inflate aluminum demand through further stimulus measures. Both factors remain quite uncertain at the moment.

You can find a more in-depth aluminum price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.

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