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Aluminum: stabilization and risks

Aluminum prices recovered from the November plunge to $2,507 and stabilized around $2,726. Prices are still well off their autumn peak of $3,229, but there is something that could push aluminum prices to local highs.

For example, the market could experience a persisting shortage of global aluminum supply with stable demand for metal from industry and the manufacturing sector. Such a deficit is also facilitated by a decrease in aluminum output, for instance, in China, which is combating harmful emissions and monitoring environmental issues. As long as this situation remains in play, aluminum prices could rise by 5-10%.

That said, a risk factor is a large amount of aluminum that was placed in storage in Vietnam during a US anti-dumping investigation against a Chinese businessman. The 1.8 mln ton stockpile of aluminum is owned by GVA, and only a tiny amount can be released for the company’s production needs, since the stockpile cannot be used or sold yet. On the one hand, the stockpile has long been in storage, and if the investigation is completed, aluminum would likely be sold off as scrap metal, which would not affect global prices. But what if that does not happen? Then the entire stockpile could be put up for sale on the open market, which, in theory, could cause aluminum prices to plunge by 25%.

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