FX.co ★ Aluminum Holds Pullback

Aluminum futures are currently valued at $2,460 per tonne, slightly below the six-week peak of $2,530 reached on May 14th. This dip is attributed to increased inventories and prevailing macroeconomic uncertainties. Metal traders have been prompted to re-warrant their aluminum holdings due to the ongoing backwardation in aluminum futures across major exchanges, which is seen as a strategy to avoid losses from extending their short positions. As a result, there was a significant overnight surge in open aluminum tonnage within LME inventories, climbing by nearly 93,000 tonnes to reach 343,025 tons on May 18th — the largest increase observed in over a year. This figure later retracted to 323 tonnes. The heightened availability aligns with a leap in aluminum production in China during April, driven by smelters accelerating output to capitalize on decreased production costs, largely thanks to abundant hydropower resources in Yunnan's production centers. Nonetheless, a more acute decline in prices was averted due to expectations of slower output in China for the remainder of the year, as firms are required to adhere to Beijing's production cap of 45 million tonnes.