Shanghai aluminum futures rose on Monday, buoyed by a price rally in the key raw material, alumina, as well as the fast-growing demand from the new energy sector.
The most-traded July aluminum contract on the Shanghai Futures Exchange gained 0.1% to 20,910 yuan ($2,886.41) per metric ton during the day’s trading. This was not far from the more than two-year high of 21,610 yuan reached last week, as aluminum prices have rallied on strong market fundamentals and increased fund buying this year.
The market was supported by higher raw material costs, with the most-traded SHFE alumina contract jumping 8.3% last week before declining 0.4% to 4,062 yuan per ton on Monday. The surge in alumina prices was driven by investors’ bets on looming supply shortages, amid slow domestic production and news of overseas supply disruptions, including Rio Tinto’s declaration of force majeure on Queensland alumina exports.
Analysts also noted that firm demand for aluminum, particularly the rapid rise in consumption from the solar and electric vehicle sectors, has been aiding price increases. This trend is aligned with China’s industrial profits swinging back into positive territory in April, while growth over the first four months held steady, suggesting that policies to bolster the economy are starting to take effect.
However, the analysts also pointed out that increased volume from Russia and some users holding back from purchasing after the recent price gains could send aluminum stocks higher in the following weeks, potentially weighing down prices.