Aluminium prices bullish outlook, will it last into 2024?

The aluminium market is experiencing a bullish sentiment, with rising prices. As we reach the end of the financial year, aluminium buyers are left wondering if this trend will last

Aluminium, a vital metal in our modern society, has gained even greater significance as sustainability takes center stage. Its versatility is evident in various industries, such as automotive manufacturing, packaging and consumer goods.

In this article, we analyze the factors influencing aluminium prices and discuss whether this bullish outlook is sustainable for buyers. Our analysis explores the various factors that affect short-term aluminium price forecasts, considering both the positive and negative influences on aluminium prices and their implications for the industry.

Anticipated surge in year-end aluminium market

As the financial year comes to a close, we anticipate a surge in year-end seasonal strength and restocking activity within the aluminum market.

This increase is driven by the emergence of attractive price points. Also, it’s important to note that because up to 80% of LME inventories originate from Russia, we could see limited availability of non-Russian material for lending purposes. As a result, we expect tighter spreads and the potential for an inventory squeeze. These factors align with our short-term bullish view as consumers rush to secure metals amid a rise in restocking activity. Learn more.

Risk appetite threat in Q4 on aluminium prices

At the end of September, the equity markets in the US experienced a significant decline, marking their worst monthly performance of 2023. This downturn was fueled by concerns over a possible federal government shutdown. However, a last-minute deal was reached that same weekend, preventing the fourth shutdown in the past decade. The deal provides temporary funding until November 17, but the threat of reaching the debt ceiling continues to dampen risk appetite in the fourth quarter, especially with the push for deep spending cuts from hard-right Republicans.

As a result, comments from Federal Reserve officials, including Chairman Jerome Powell, will be closely examined by investors seeking to comprehend the potential ramifications of a federal government shutdown on the US economy. Learn more.

Aluminium price – expect rangebound trading with upward bias

According to our short-term aluminium price forecast, the price of LME aluminium showed an upward trend in September, with an average monthly price of $2,177 per tonne, up from August’s $2,134 per tonne. As we move into October and beyond, we anticipate that aluminium prices will engage in rangebound trading with a slight upward bias, influenced by shifting macroeconomic and microeconomic dynamics.

On the macro side, we believe that the market sentiment has become more positive due to the current discussion that the United States economy is on track for a soft landing. With one more interest rate increase expected before the end of the trading year, the US Federal Reserve is likely to pause and adopt a less aggressive stance, which may reduce some of the support for the dollar index. Learn more.

SHFE aluminium price supported by stimulus policies

The impact of domestic policy measures aimed at stimulating China’s economy is starting to show in the SHFE aluminium prices, which could contribute to higher prices. Additionally, October traditionally experiences strong demand, further supporting aluminium prices. However, it is crucial to remain vigilant of potential risks to prices arising from uncertainties in oil prices, financial markets and the Russia-Ukraine crisis.

Furthermore, there has been a decline in aluminium inventories in China. As of September 28, inventories in Shanghai Futures Exchange warehouses stood at 79,194 tonnes, compared to 98,114 tonnes at the end of August. Learn more.

LME aluminium inventories

Meanwhile, LME aluminium warehouse inventories currently amount to 504,850 tonnes, increasing from 482,300 tonnes one week ago due to periodic deliveries into Asian warehouses. Recent warrant cancellations have been observed, and 62% of the stock is currently booked for removal, up from 56% at the end of August.

In conclusion, the aluminium market is currently experiencing a bullish sentiment and prices are on the rise. However, the sustainability of this bullish outlook remains uncertain as the market remains volatile and unpredictable.

It’s imperative for individuals involved in the aluminium trade, including buyers of aluminium products, to keep a close eye on the market and prepare for any potential price volatility that may arise. While any upside in the aluminium market may be limited, companies can take advantage of the current bullish sentiment to hedge their positions and prepare for any potential downturns in the future.

To understand the complex market conditions influencing price volatility, download our monthly base metals price forecast, including the latest aluminium price forecasts.

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