Aluminium Prices surged on London metal exchange, with LME Aluminium marking a surge from the level of $1819.75 (Day’s low on 12th March) to the current level of around $1899.75. The Aluminium prices before the surge experienced a sharp decline from the level of $1902.00 (Day’s high on 1St March 2019) to the level of $1819.75 (Day’s low on 11 March).
The slump in aluminium prices was caused by the week data from the top metal importer China. The China Producer Price Index, which is reported every month was reported lower for February 2019 at 0.1%, as compared to the previously reported of 0.2%. The fall in producer price index (PPI) concerned the market participants about the country’s possible weaker demand for commodities, which in turn exerted pressure on aluminium prices along with other base metals.
However, China’s inflation remains modest, indicated from the Consumer price index (CPI), which is reported on a monthly basis. China CPI declined on year on year basis to 1.5% for the month of February 2019, which marked another decline after January 2019 CPI reported at 1.7%. The CPI slipped for the third consecutive time below the mean value of 2%, which indicates a moderate level of inflation in the country.
However, the hope of a rise in demand for the second quarter in the wake of improving U.S-China trade talks further supported the aluminium prices. The less environmental impact created by the aluminium uses, supported its prices as well, as its use does not hamper the emerging aim of economies to transfer towards the zero-emission economy in line with Euro 6 standards.
On the supply side, a decline in monthly production for the aluminium raised concerns over a supply disruption among the market participants and supported the metal prices. As per the data from International Aluminium Institute, the total world primary aluminium production declined from 10,802 thousand metric tonnes in the period of December 2018 to January 2019, to 5,304 thousand metric tonnes in the period of January 2019 to February 2019.
The significant loss in primary aluminium production came from China. China Aluminium production declined from 6,109 thousand metric tonnes in December 2018 to January 2019 to 2,969 from January 2019 to February 2019. The significant loss in China was in line with higher tariff imposed on aluminium export to the U.S. Another factor which contributed to the production decline was the ongoing environmental concern in China. However, demand for the aluminium in China remain steady, and due to an increased tariff on U.S. import, the China import drifted toward the other producer.
The North and South America also marked a decline in primary aluminium production, with North America production declined from 655 thousand million metric tonnes in December 2018 to January 2019 to 326 thousand million metric tonnes.
To gauge the direction of aluminium prices further, the market participants are eyeing on the tariff wars development. Both China and the U.S. are engaged in trade resolution, which will further reduce the tariff and support the U.S. aluminium import in China again and increase the demand of the metal.
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