Aluminum Prices Gain Momentum On Potential Supply-Side Changes
Post Date: 15 Feb 2017 Viewed: 772
Aluminum prices gained momentum on Tuesday, bucking the overall downtrend in the base metals. The commodity pushed above the key $1900 price line early in the session and traded in the range of $1871-$1907. Support was at $1800 and resistance at $1970.
Some bullish data for the commodity out Tuesday included that China’s exports of unwrought aluminum and aluminum products reached 390,000 tons in the first month of 2017, up 2.6% year-on-year, while US aluminum imports (excluding imports from Canada) surged by 68.2% year-on-year in 2016 to 1.95 million tons, according to Metal Bulletin.
Adding extra impetus to the upside were protests at a planned aluminum plant in China and potential output cuts in China. On Monday, Reuters reported that the Chinese government was proposing massive aluminum production cuts in the upcoming heating season that runs from November 2017 to February 2018. The plan is in line with the government’s anti-pollution efforts, but questions remain over whether the government will push through with large output cuts that will most definitely result in layoffs.
While protests are common when job losses are pending, right now concerned Chinese citizens are protesting pollution. On Tuesday, residents in an oil town near China’s border with Russia protested Tuesday against a planned aluminum plant over pollution fears. More than 200 people chanted and held banners outside the Daqing city government headquarters. They are against the 46 billion yuan ($6.7 billion) plant proposed by aluminum producer Zhongwang Holdings. The plant would produce 2 million tons of high precision aluminum and aluminum alloy per year and would create more than 30,000 jobs, according to a government statement. The protests add support to the government’s initiatives to curb pollution, and the support could mean that production cuts and pollution reduction are prioritized over jobs. The cuts could also further boost aluminum prices, or at the very least continue to support them even if China’s aluminum demand declines as its infrastructure development programs wind down.