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Via Metal Miner
Overall, the Aluminum Monthly Metals Index (MMI) remained sideways, with a 2.03% rise from March to April. Aluminum prices outperformed all base metals throughout March, with a 4.71% rise from the close of February. Prices continued their rally throughout April, hitting their highest level since February 2023 by April 8.
The aluminum price rally continued to play out during the first weeks of April as prices repeatedly toppled previous highs. This included their 2023 close, as prices made it over the $2,400/mt mark during the first week of Q2, leaving their 2023 peak as the next significant price ceiling. Should aluminum prices, which currently stand at $2,454/mt, break above their January 18, 2023 peak of $2,662, this may put the final nail in the coffin of their more than year-long sideways trend.
Aluminum prices continued to trend up alongside other base metals like copper and tin, which remain within the middle of their own respective rebounds. The rallies have started to lead to uptrend calls, particularly for copper, amid rising bullish sentiment within the market.
Data from the LME showed a rise in investment fund positioning for aluminum over recent weeks, which offered momentum for the rally. Furthermore, total positions for funds hit their highest level since the LME began offering Commitments of Traders Reports (COTR).
The bias among funds appeared bearish for most of Q1, with short positions outpacing long positions, until the spread shifted net long by mid-March. By the end of the first week of April, investment fund positioning showed the largest net long bias since February 2023 as well as the largest volume of net long positions since March 2022.
While investment funds do not control the market, their large positions give them an outsized impact on price direction. However, their bias often wavers in response to market developments, which means the most recent upside momentum offered by funds could fall apart should they begin to unravel their long positions.
The aluminum market lacks the same fundamentals as copper and tin, both of which saw supply concerns manifest into an increasingly bullish sentiment among market participants. However, drought conditions in China's Yunnan Province significantly crimped China's overall primary aluminum output during February. According to data from the International Aluminum Institute, production levels fell to their lowest level in a year.
China's dry season will come to an end by the close of April, meaning output will likely recover in the coming months. The return of Chinese supply held back by power-related capacity limits may prove enough to temper bulls prior to prices breaking their 2023 peak.
The bullish gust that helped lift prices came alongside rising global aluminum premiums. Indeed, the Midwest Premium, a proxy for U.S. demand, spiked at the close of Q1. The premium subsequently started to edge lower, only to rise nearly 17% in March. The rise echoes sentiments from brokers, who noted steady demand levels.
However, the same brokers suggested the market appeared somewhat oversupplied, which may temper the upside momentum for both the premium and aluminum prices. This is especially likely as inflation numbers remain hot, conceivably forcing the Federal Reserve to delay its rate cuts.
Source: MetalMiner Insights
Abroad, the supply-demand balance appears tighter in regards to aluminum prices. Europe's Duty Unpaid premium saw a comparable 14% month-over-month increase as it remains within an uptrend that began in December 2023. Meanwhile, the Main Japanese Port premium (MJP) showed a staggering 61% quarterly rise. Much of this jump appeared to stem from Chinese and South Korean demand. However, it also came with caution that demand levels may not be enough to sustain the spike as Chinese output levels recover during Q2.
By Nichole Bastin
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