Aluminium: Chinese tailwinds to morph into headwinds – TDS

Aluminium prices are rising amid concerns that China's drive to cut emissions could kill capacity. As Daniel Ghali, Commodity Strategist at TD Securities notes, decarbonization may kill aluminium supply.

See: The outlook is brighter for palladium than platinum – CE 

Key quotes

“Our gauge of supply risk is showing nascent signs of waning, and provincial sales of strategic reserves could dent this premium.” 

“Reports of emissions cuts have boosted sentiment, but Inner Mongolia's capacity is contained in cities that have not contributed to overconsumption.” 

“Smelting capacity will mostly grow in Yunnan, which relies on hydropower and wind for energy. Chinese supply angst is overblown.” 

“Positioning has surged, with top SHFE accounts growing length across metals. This ties into reflation, inflation-hedging, and the supercycle narrative but does not reflect facts on the ground.” 

“Chinese deleveraging could see tailwinds morph into headwinds, ultimately catalyzing a reversal in length.”