Investors have been piling into aluminum during its ascent to a decade high, with a combination of booming demand and seismic supply reforms helping the lightweight metal to avoid a speculative exodus seen in other metals markets.
Total non-hedging positions in London Metal Exchange aluminum contracts have more than doubled since a nadir in May, while speculative exposure in other industrial metals including copper and zinc has tumbled. And while concerns over tighter Federal Reserve policy have pressured many commodities markets, aluminum has rallied to a 10-year high as the industry braces for deepening deficits.
Aluminum’s standout performance has come as producers in China suffer dual hammer blows from a seasonal power crunch and a pollution crackdown that’s set to hobble output in the longer term. Simultaneously, usage is booming in construction, car-making and consumer products, while rising consumption in solar cells and electric vehicles is turbocharging the outlook for future demand.
“It’s a very interesting market, and I’m definitely getting a lot more calls from clients about aluminum this year,” Wenyu Yao, senior commodities strategist at ING Bank, said by phone from London. “The big consumers are also very aware of what is going on in the market, and they’re taking action to respond to the higher prices.”
Prices rallied as much as 2.9% to $2,726.50 a ton on the LME, hitting the highest since 2011 and moving closer to an all-time high above $3,300 a ton. Goldman Sachs Group Inc, Citigroup Inc. and Trafigura Group are among those forecasting further gains.
© 2021 Bloomberg L.P.