Aluminium Market Update: Why Are Aluminium Prices Lagging Behind Other Base Metals?

Base metals prices have recovered significantly since January’s lows after news that the US and China are inching closer to signing a trade deal. According to reports, both sides will lower or remove tariffs upon signing a trade agreement, but it is still unclear whether US Section 232 tariffs on steel and aluminium imports from China will stay in place. Beijing is also expected to grant foreign investors better market access in certain fields, while foreign (US) intellectual property would be awarded more protection. Regardless of the final agreement, it is evident that both sides will be able to claim a great victory and the consensus opinion among analysts is that the outcome will spur on metal prices.

This expectation explains the pressure base metals prices came under in mid-March on news that the planned meeting between Donald Trump and Xi Jinping for the signing of a trade deal will take place in late April, at the earliest. Shortly after that, base metals prices rose again with increasing backwardation after Chinese Premier Li Keqiang announced Beijing will roll out on April 1st a planned cut in value-added tax (VAT) from 16% to 13% for manufacturing industries (instead of May 1, as previously expected). This shows that metal prices are intertwined with developments in China.

But all of these developments didn’t help much the aluminium price: the cash LME price has been trading below US$ 1900/tonne since December 24, 2018, averaging US$ 1853 /t in the first two months of 2019. The aluminium price (cash, LME) rose on March 19 to over US$ 1900 /tonne (US$ 1907.5/t) for the first time since December 21, on news of a cyber-attack on Norsk Hydro.


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