Aluminium Prices Surge on Beijing’s Economic Support; Fed Considers Inflation Risks


In a recent trading session, LME aluminum prices experienced a noteworthy surge, closing at $2,181 per metric ton—a gain of $35.5 per metric ton or a 1.65% increase. The driving force behind this positive movement is the renewed investor confidence stemming from Beijing’s commitment to bolster the economy, thus stimulating demand.

Shifting our focus to the broader economic landscape. The Federal Reserve’s July policy meeting minutes reveal a prevailing concern among most Fed members regarding heightened inflation risks. Consequently, discussions have emerged about implementing more stringent policy measures to address this issue.

The Federal Reserve’s response to last year’s peak inflation of 9.1% involved a series of 11 rate hikes throughout 2023. Beginning with a 25-basis-point increase in July. As a result, the federal fund’s target rate range now stands at 5.25% to 5.50%.

While inflation has diminished to 3% year-over-year as of June 2023, it still surpasses the Fed’s 2% target.

Investor Confidence Boosted by Beijing’s Economic Support as Fed Addresses Inflation Risks

China observed a surge in output levels in July, nearing record highs. However, the construction sector sentiment dampened due to Country Garden’s bond trading suspension.

This development led to a discount on immediate aluminum delivery compared to the three-month contract on LME, indicating subdued demand and increasing supply.

Notably, some policymakers advocate maintaining the current interest rate levels, highlighting a division among decision-makers. On a fundamental note, domestic aluminum ingot casting volume remains limited, reducing short-term surge possibilities.

Predictions suggest that domestic aluminum ingot inventory will dip below 500,000 metric tons, accompanied by increased products from Yunnan’s production resumption.

Encouragingly, mid-August witnessed improved consumption and active downstream inventory replenishment, further supporting endeavors to reduce aluminum product inventories and enhancing market sentiment.