Bullish trend persistent for aluminium

The present bullish trend in aluminium and a tight supply situation is indicating towards a positive outlook for aluminium and a turning point after a long time.

The metal has been trading at a seventeen-month high around $2,000 per ton in the current weeks and achieved a 20% rise in July since $1,677 in February 2014.

According to Gaurav Sodhi, resources analyst at Intelligent Investor (as told to CNBC), "We`re probably now at a point where the aluminum market may be turning and that has everything to do with supply shutting down in China and as supply-demand re-balances across the entire industry."

"Over the last five or eight years, China has massively increased its supply of aluminum and that`s depressed prices across the sector. But that's changing a little a now. As China focuses on energy-intensive activities, they are changing the economic mix of production and that`s forcing a lot of aluminum production to be shut down," he added.

Heavy capacity cut and smelter shutdown in China, the world`s top aluminum producer help in reducing aluminium stock to a considerable extent in May this year. That resulted in a global daily average output fall by 500 tons in June, according to the International Aluminum Institute. Meanwhile, Rusal, has also reduced its first-quarter production declined by more than 2 percent.

JPMorgan has already predicted 439,000 metric tons of aluminum deficits in 2014, compared to a surplus of over 2 million tons during the financial crisis. Reuter is also expecting this deficit to continue further in 2015.

Year-to-date, when compared to other metals like lead and copper, aluminum is one of the top performing base metals in the market that has shown gain that has exceeded 12 percent.

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