Aluminium is a metal worth considering for a medium-term buy. Here are the positive reasons for that:
- Global aluminium demand growth is set to grow moved by energy transition-related sectors like transportation and renewable energy from China, the US and Europe. Many major economies have a real push now to try and reach ‘net-zero’ carbon emissions and there is a big political drive for renewable energy and electric power.
- China’s primary supply growth is set to plateau. China is under pressure to bring down carbon dioxide emissions from primary aluminium smelting and ING thinks capacity could be capped under 45 million tonnes. The upshot is that secondary aluminium capacity has to take up the slack.
- Emission concerns in Inner Mongolia and Yunnan due to hydroelectric water shortages have meant smelters here have had to dial back production.
- Aluminium is, according to Bloomberg, the least vulnerable to China’s state reserve sale.
The seasonal buying and selling of aluminium do not provide much helpful information apart from revealing that in the last 21 years between July and November prices have fallen 11 times and gained 10 times. The largest gain was in 2010 with a 21.15% gain and the largest loss was in the global financial crisis of 2008 with a -37.10% loss. This shows a balanced picture overall and means that supply and demand issues should take precedence over driving prices.
The zone marked on the chart looks like a good area to expect buyers as long as the demand/supply imbalance remains.