Will China's economic slowdown stymie aluminum prices?

Aluminum prices are still trapped in sideways trading after a 2.78% drop in February, with prices edging up in the first three weeks of March, now standing 2.17% above the end of February.  

Is there correlation with copper prices? 

As the year’s first quarter draws to an end, aluminum prices continue to show modest momentum amid market uncertainty, with prices scaling 11-week highs on March 18 in tandem with copper prices. 

However, aluminum remains largely trapped in sideways trading, with potential for a breakout as aluminum sentiment is historically linked to copper and tin, as both have enjoyed recent gains. 

However, the links between mains metals were corroded in 2023, as copper and tin faced unique supply threats, while aluminum output remained strong in 2023 in the face of weak demand.  

Investment Funds

The positions of investment funds carry important implications for the metals market, with recent data indicating a slight positive attitude towards copper futures by a batch of global funds compared to aluminum according to the London Metals Exchange. 

And for all metals, the connection with the Federal Reserve is strong, with the Fed deciding to maintain interest rates in March while hinting at a likely rate cut in June, which in turn could support growth and demand on metals.

The China Issue 

In the US, aluminum demand is at most tepid, however the outlook in China is more unclear as markets monitor demand-supply dynamics. 

Recent data indicated slight growth in Chinese aluminum demand while output slowed down in the first few months of 2024. 

US industrial production rallied 7% in the first two months of 2024, which is usually a strong engine for demand on all industrial metals, including aluminum.