Aluminum prices are facing short-term volatility as geopolitical tensions ease and market dynamics shift. recent signing of electronic memorandum of understanding between the United States and Iran has contributed to a decline in the geopolitical risk premium associated with commodities. As fears surrounding the Middle East conflict diminish, this easing has significantly impacted market sentiment .
In May,the US consumer price index (CPI) rose by 4.2% year-on-year, marking a three-year high,while core CPI also showed strength . Market participants are increasingly anticipating a resumption of interest rate hikes by the Federal Reserve within the year,which,combined with tightening liquidity, is exerting downward pressure on metal valuations.
On the supply side,the ongoing conflict in the Middle East has led to involuntary production cuts in aluminum capacity abroad. This situation has widened expectations of a global supply deficit. Rising energy costs are expected to provide solid foundation for aluminum prices on the London Metal Exchange (LME).
In China, a trend of inventory destocking is becoming evident . Factors such as an increase in the proportion of liquid aluminum,robust export demand, and a normalization of supply affecting aluminum ingot formation are driving this trend. Analysts predict that inventories could drop to approximately 1.28 million metric tons by late June, potentially nearing 1.2 million metric tons by early July,which may offer some support to prices .
Despite these factors,high domestic inventory levels remain a significant concern . prevailing bearish macroeconomic sentiment continues to overshadow the market,leaving short-term domestic aluminum prices in state of decline,subject to fluctuations.
