On Monday, aluminum prices increased due to supply concerns amid reports of smelters holding back production in China.
Aluminum futures increased by 3.13% to $2,468.50 per ton on February 20’s Asian afternoon session.
The commonly traded contract in Shanghai Futures Exchange went up by 1.40% to ¥18,775.00 a ton.
In contrast, LME aluminum prices have been low recently, decreasing by 9.00% since January 26, led by significant inventory gains. Its stocks have heightened by 56.00% over the past month.
Also, a weaker dollar is beneficial to the prices of metals, said by experts. As a result, commodities priced in the US currency will be more affordable for buyers with other cash.
According to analysts, the metal’s output in one of China’s top-producing provinces, Yunnan, will decline after new cutbacks are ordered.
Besides, they believe that the market had support from the rise in aluminum prices while production is curbed in the province. However, there are still many supply concerns supporting metal prices.
Moreover, the commodity’s capacity is anticipated to decline by 800,000.00 tons in Yunnan due to reductions. Additionally, 415,000.00 tons of smelting capacity are projected to decrease over the weekend.
Last year, China’s output rose by 4.50% to a record high due to a slowdown of power supply restrictions.
Yunnan Aluminum Inventory Start Rationing Policy
Yunnan implemented a power rationing policy. This may cause an aluminum production reduction in the province. It may reach 670,000.00 to 800,000.00 metric tons.
With the new policy, the industry would maintain a tight supply-demand as the prices benefit from a great momentum.
Moreover, a part of direct shipments from smelters to plants rose, expecting a fast decline in aluminum inflows.
However, analysts said that the aluminum ingot volumes across eight major Chinese markets were up by 17,700 mt.
They anticipate that the domestic inventory will continue to climb in 2023 by 3.50% as imports reach 350,000.00 mt. Also, the storage will likely build-up, and prices will retreat by then.