Goldman Sachs (NYSE:GS) is bullish on aluminum, projecting it to rise following China’s supply-side reforms.
According to a recent report from CNBC, Goldman expects aluminum prices to hit the $2,000 per metric ton point in six months and $2,100 per ton in a year.
Year-to-date, aluminum prices have outperformed other industrial metals, climbing roughly 15% compared to steel and 3% compared to copper, the news source stated.
The bank’s analysts wrote:
In our view, this strong performance has reflected an increase in the potential for aluminum to be the next target of supply-side reform in China, a tightening ex-China balance, and rising costs of production.
Further, global political developments may also be supportive of capacity and production cuts, given the two leaders of the U.S. and China launched a 100-day (trade) plan on April 7. These developments support our existing view that aluminum is the next target for supply-side reform in China.
Aluminum Bucks the Trend in April
Our own Raul de Frutos wrote this week that while industrial metals for the most part declined last month, this was not the case for aluminum.
De Frutos wrote:
China’s energy intensive aluminum smelters receive nearly 90% of their energy needs from coal. In addition, China has received a lot of international pressure to reduce its aluminum capacity. For these reasons, aluminum could be the new steel this year.
How will aluminum and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:
by Kyle Fitzsimmons