Good News for Aluminum! It Broke Its Losing Streak Last Week
Base Metals' Performance: Mixed Results for the Last Week of March
Aluminum broke its losing streak
After declining for three consecutive trading weeks, aluminum gained in the week ending on April 2. LME 3M Aluminum gained 4.1% and ended last week at $1,536 per metric ton. It was just $14 away from the important resistance price level of $1,550 per metric ton. March 28, the first trading day of the week, was a holiday due to Easter Monday. Aluminum gained in the other four trading days last week. Since the beginning of 2016, aluminum gained 1.9%. The price levels of $1,500 and $1,550 per metric ton are the nearest prominent support and resistance levels for aluminum in the LME (London Metal Exchange).
Backwardation to contango
Aluminum was in backwardation in February. The decline in aluminum prices resulted in production cuts from aluminum producers. It pushed the Market into backwardation. Backwardation is a situation where the spot market is tight. Spot market prices will be higher than the futures prices. According to data released by the Aluminum Institute, the production of aluminum from the producers other than China hit a four-year high in February. Apparently, some non-Chinese aluminum caused the production to take advantage of higher prices. This moved the Market from backwardation to contango due to improved supply. Contango is the opposite of backwardation.
China’s upbeat factory data
China’s upbeat factory data also supported the aluminum rally last week. According to data released by the China Logistics Information Center last week, China’s manufacturing purchasing managers’ index for March was 50.2. This is better than the expectation of 49.3. It’s also higher than February’s value of 49. Considering the fact that China is one of the major aluminum consumers, the upbeat data supported aluminum prices. Noted aluminum producers Alcoa (AA), Century Aluminum (CENX), Norsk Hydro (NHYDY), and Rio Tinto (RIO) gained 0.63%, 3.3%, 2.50%, and 1.7%, respectively. The SPDR S&P Metals & Mining ETF (XME) gained 2.2% last week. Next, we’ll discuss how the remaining base metals performed last week in the LME.
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