Aluminum price rally appears to have fizzled out – TDS

Aluminum prices are struggling to move higher after last week’s signs of CTA buying running out, notes Daniel Ghali, senior commodities strategist.

Demand sentiment is starting to fall again

“Under the hood, demand sentiment embedded in the cross-section of commodity prices has started to decline again, after a brief rebound from the lows marked by the recent turmoil in August.”

“The supply risk premium has been an insulating force for aluminum and has certainly supported the price recovery, reflecting the risks to European smelter output associated with higher energy prices. But our supply risk premia indicator also points to the first signs of notable pressure since Ukraine’s incursion into Russia.

“While CTA flows are likely to remain muted next week, barring a significant decline in prices, continued pressure from demand sentiment or reduced supply risk premiums could ultimately catalyze renewed selling activity in a big crisis However, barring this catalyst, the balance of risks suggests that LME3m prices could remain fixed at $2500/t in the near term.