Aluminium prices increased due to tight supply and short covering.

Short covering and worries about a lack of supply on the international market caused aluminium prices to jump by 1.07% yesterday, closing at 235.5. At a substantial discount of $62.44 per tonne to the three-month contract, the largest since August 2007, the London Metal Exchange (LME) cash aluminium contract was traded. The reason behind this discrepancy was a sudden surge in stockpiles, which in less than a month more than quadrupled to 1.1 million tonnes, indicating peculiar market conditions amid supply interruptions.

Strengthening job creation numbers caused the US currency to rise, indicating possible postponements of the Federal Reserve’s expected cycle of quantitative easing, which normally drives up commodities prices. Market worries were exacerbated by recent difficulties in the supply of alumina. Shortages of this essential precursor to aluminium were made worse by China’s decreased output and Rio Tinto’s (LON: RIO) declaration of force majeure on alumina shipments from Australian refineries.

An optimistic outlook among market players was influenced by this supply constraint. One multinational aluminium manufacturer gave Japanese purchasers a significant premium of $175 per metric tonne for shipments from July to September in the face of severe supply limitations, which represents an 18% to 21% quarterly rise.

Global primary aluminium output increased by 3.3% year over year in April to reach 5.898 million tonnes, as reported by the International Aluminium Institute (IAI). Significantly, China imported 380,000 metric tonnes of unwrought aluminium in April, a 72.1% increase over the same month last year. In the first four months of this year, import volumes increased by 86.6%, indicating strong global demand despite supply constraints.

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