Despite Chinese winter smelter production cuts falling short of expectations and domestic stocks continuing to climb, prices still rallied into the year-end to reach $2,290 per tonne for the first time since March 2012. A weaker US dollar and bullish investor sentiment toward base metals in general, given the backdrop of concerted global economic growth, have been the factors driving prices higher.
Admittedly, Chinas aluminium demand has become bullish, as usage rose by an estimated 7.1% year-on-year in 2017, which is significantly stronger than had been anticipated. Q4 2017 turned out to be particularly strong, with smelter production cuts having had a negligible impact on levels of output at the countrys semi fabricating plants. The expected shortfall in liquid metal availability has had virtually no impact, allowing semi fabricators to keep feeding growing amounts of aluminium products into key end-use sectors. We have revised up our Q1 2018 LME cash price forecast to $2,163 per tonne.
Analysis by Andy Cole, base metals analyst and editor of MBRs Base Metals Weekly Market Tracker.
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