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Goldman Sachs raises price target to $4,000 as London aluminum surges

Views: 0     Author: Site Editor     Publish Time: 2022-02-17      Origin: Site

Aluminum prices hit their highest level since 2008 on Tuesday, driven by investor concerns about tight supplies and falling inventories. Benchmark aluminum on the London Metal Exchange (LME) rose as much as 3.3% to hit $3,236 a tonne.

Aluminum has been a good performer on the London Metal Exchange this year, with bullish investors pouring into the rapidly tightening market and targeting a new record at $3,380 a tonne next.best stucco embossed aluminum coil-Decoulife

Prices of key raw materials, from nickel to crude oil, have surged in recent months as consumption soars as the global economy recovers from the pandemic, while supply has not kept pace. Goldman Sachs has raised its 12-month aluminum price forecast to a record $4,000 a tonne, citing supply disruptions caused by power outages in China and Europe at a time when demand in developed markets is “unusual.”

Prices for the light metal, which is used for packaging and transportation, are up about 14% this year after rising 42% in 2021 as China curbs production to reduce pollution. Aluminum production in China accounts for more than half of supply.

"Aluminium production was drastically reduced in the run-up to the Beijing Olympics to improve air quality," said WisdomTree analyst Nitesh Shah, predicting that rising demand will push up prices in the long run.

"The aluminum market is facing a melt-up this year due to a simultaneous shortage of aluminum inventories in China and outside of China," Goldman analysts said in a note.

Concerns about supply shortages quickly pushed the premium of spot aluminium over three-month futures to $40 a tonne, the highest level since July 2018.

"A key feature of physical scarcity is that it has a propensity to spread, leading to large price swings," Goldman analysts said.

"Aluminum is currently in a storm as the European energy crisis and the situation in China still restrict supply," said Wenyu Yao, commodities strategist at ING.

Aluminum inventories in LME-registered warehouses have fallen to 767,700 tonnes from nearly 2 million tonnes in March last year, the lowest level since 2007. Inventories in Shanghai Futures Exchange warehouses, which typically rise at the beginning of the year, have fallen by nearly 20% since the beginning of the year to 266,906 tonnes.

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