As we noted previously, Alcoa (AA) is trading well below its 2017 highs. Commodity market sentiments have been dented over the last few months. In this part, we’ll see what could drive Alcoa in the coming months.
- Chinese aluminum exports have been the key issue facing global aluminum markets. After the brief lull in 1Q17, Chinese aluminum exports are rising again. In May, China’s unwrought aluminum exports were the second-highest exports on record. In the coming months, investors should closely follow Chinese aluminum exports data. A slowdown in domestic demand growth rates combined with rising aluminum production could spur Chinese aluminum exports in the coming months.
- Markets would also look for more clarity on how President Trump plans to fund his trillion-dollar infrastructure investment plans. Notably, expectations of a revival in US aluminum demand supported aluminum’s rally.
- We have seen a divergence in alumina and aluminum prices this year. While aluminum is still trading with decent yearly gains, alumina prices have come under pressure. Notably, lower alumina prices could also impact aluminum prices (DBC) (CENX). Metals generally adjust to cost curves. Since falling alumina prices have lowered the global cost curve, it could also impact aluminum prices.
Meanwhile, aluminum markets seem to be banking on China’s capacity curtailments in 4Q17. In the next part, we’ll look at the Chinese aluminum industry’s outlook and analyze its implications for aluminum producers (RIO) (NHYDY).