Aluminium Prices Surge to 16-Week High Amid China's Economic Stimulus

Aluminium, a vital metal used in various industries such as construction, transportation, and packaging, has recently reached a significant milestone. On Friday, aluminium prices in London soared to a 16-week high, primarily driven by new economic stimulus measures introduced by China, the world's largest consumer of metals. This surge in prices reflects the ongoing demand and market dynamics that are influenced by global economic conditions.

As of 1026 GMT, three-month aluminium on the London Metal Exchange (LME) increased by 1.2%, reaching $2,641.50 per metric ton. The price even peaked at $2,659, marking the highest level since June 6. This upward trend is indicative of a broader market movement, with aluminium prices on track for a weekly growth of 6.3%. The recent stimulus package rolled out by China is the most aggressive since the pandemic, aimed at boosting economic activity ahead of the Golden Week holiday from October 1 to 7.

Traders have noted that buying activity from funds, particularly commodity trading advisors (CTAs) that utilize computer programs for trading, continues to support aluminium prices. However, this buying momentum appears to be weakening for other metals. Analysts from Bank of America (BofA) have projected that the global aluminium market will face a deficit next year, forecasting prices to reach $3,000 per ton by 2025. They also highlighted that there are “pockets of tightness on the physical market,” with a significant portion of LME inventories set for removal.

In contrast, LME copper experienced a slight decline of 0.6%, settling at $10,019 after reaching a high of $10,095, the highest since June 7. Despite the recent stimulus measures, some analysts express skepticism regarding their potential impact on the demand for industrial metals. Ewa Manthey, a commodities analyst at ING, emphasized the need for stability in property prices and a reduction in excess housing inventories to foster recovery in the property market. Until these conditions are met, the drag on economic growth is likely to persist.

Other metals also showed varied performance, with LME nickel rising by 1.1% to $16,915, while zinc fell by 0.3% to $3,090. Lead eased slightly by 0.1% to $2,133.50, and tin remained steady at $32,325. This mixed performance across different metals underscores the complexities of the global commodities market.

The recent rise in aluminium prices highlights the intricate relationship between economic policies and market dynamics. As China implements its stimulus measures, the effects on demand for metals will be closely monitored. For investors and industry stakeholders, understanding these trends is crucial for making informed decisions in a rapidly changing economic landscape. The outlook for aluminium and other metals remains uncertain, but the current developments certainly warrant attention.