Market and product

LONDON (Commodity Online): Aluminum continues to struggle around $1,950 a metric ton support, said Edward Meir, commodities consultant with INTL FCStone.

Meir continued that, “Some of this may be due to the lack of fresh production cutbacks despite prices below $2,000. This is especially true of China, where year-to-date production is up some 10% through May and now likely running ahead of demand given the slowdown in the Chinese economy.”

“Moreover, with local Chinese aluminum prices hovering around $2,500, there seems to be little incentive to cut back as unlike in the West, producers still remain profitable. Also, there may be growing concern about aluminum stockpiles locked up in financing deals,” he added.

“There is growing concern that the London Metal Exchange “may have to address the issue more forcefully given the lengthy aluminum queues that are now impacting the load-out rates in other metals,” Meir continued.

“Another cloud hanging over the financing program is whether the Fed will force the major banks to divest their warehouse holdings. We have to see how all this plays out in the months ahead, but with the possibility of up to 8 million tons of aluminum ‘locked up,’ there is always the chance that the metal becomes ‘unlocked’ under the right circumstances,” he concluded.

As of Friday, LME aluminum was $7.75 softer at $1,946.25 even though most other precious and base metals were higher.