FX.co ★ Aluminum Pulls Back from 6-Week High

Aluminum futures remained steady at $2,450 per tonne, maintaining most of the decline following the recent peak of $2,530 reached on May 14th. This situation arises against the backdrop of abundant supply and an uncertain macroeconomic climate. Ongoing backwardation in aluminum futures across major exchanges prompted metal traders to re-warrant their aluminum to avoid incurring losses when rolling over their short positions. As a result, the open tonnage in LME inventories rose sharply by nearly 93,000 tonnes, reaching a total of 343,025 tonnes, marking the most significant increase in over a year. This heightened supply coincided with a surge in aluminum production in China during April, as smelters maximized production to capitalize on reduced costs, largely due to plentiful hydropower in the production regions of Yunnan. However, a more pronounced decline was mitigated by expectations of reduced production in China for the remainder of the year, as companies adhere to Beijing's imposed production cap of 45 million tonnes.