How to analyse the aluminium stock market price

Aluminium is one of the commodities that can be traded online but, as with all other stock market assets, trading aluminium requires specific knowledge and the ability to analyse this value. In order to carry out these analyses, it is therefore necessary to have a good knowledge of the aluminium market, its quotation data and the external factors that can influence its price evolution. It is precisely this information that we suggest you discover here in more detail.  

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How to analyse the aluminium stock market price
Analysis N°1

The global economic situation will be one of the most important elements to monitor, as aluminium is used in many cyclical sectors such as the automotive, construction, technology and aerospace industries. Demand therefore depends on the economic health of these industries.

Analysis N°2

Production capacity is also to be monitored with the main producing countries being China, North America and Russia. Indeed, the production of these countries has a strong and direct impact on the supply of aluminium as well as on its price. Stock levels will of course also be monitored.

Analysis N°3

We will also keep an eye on the production costs of aluminium as it can be very expensive to produce, at around $2,000 per tonne. Thus, if the price of aluminium is below this amount, some smelters could close and reduce overall supply.

Analysis N°4

Similarly, the price of electricity is an interesting element to follow because production requires a lot of energy. An electricity price that is too high therefore leads to high production costs and thus influences supply.

Analysis N°5

Finally, it is of course also necessary to closely monitor the Forex or foreign exchange market and in particular the quotation of the US dollar against other currencies. It is in this currency that aluminium is quoted and the value of the dollar can therefore influence demand upwards or downwards.

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General presentation of stock market aluminium :

First, we will take a closer look at aluminium as a stock market asset with a more detailed presentation of this metal.

First of all, it should be remembered that aluminium is a metal that is used in the aeronautics, transport, construction and chemical industries as a catalyst.

Aluminium is extracted from an ore called bauxite, which is mainly produced in Australia, China, India and Guinea. Several tens of millions of tonnes of aluminium are produced each year worldwide.

Of course, as we will see in more detail below, the price of aluminium is influenced by various external elements and factors such as general macro-economic conditions, since the demand for aluminium depends to a large extent on the production of durable goods in terms of its industrial use. Between 2008 and 2009, a significant drop in the price of this metal on the stock exchange was observed due to the crisis that affected this sector.

Aluminium is mainly traded on the London Metal Exchange, which is the London market specialising in exchange metals. Of course, derivatives are also continuously quoted on this market, including futures, ETCs and options.

Aluminium is also quoted in dollars per tonne and physical aluminium is mostly traded by manufacturers.

 

The main uses of aluminium in the world :

To understand what can influence the price of aluminium on the stock market, it is also necessary to know who uses it and why.

  • Aluminium has many uses and is frequently used in the transport industry for the production of cars, planes, trucks, trains and ships. It is also used in the food packaging industry.
  • The construction industry with the production of doors, windows or gutters also consumes a lot of aluminium, as do consumer goods in the manufacture of appliances or kitchen utensils for example.
  • Aluminium is also used in electrical wires despite its lower conductivity compared to copper and because of its lower price.
  • Finally, aluminium is also useful for the technology sector as it is widely used in electronics.

 

Market and quotation of stock exchange aluminium :

As we have seen above, the main exchange trade in aluminium is on the LME, where several tens of millions of futures and forward contracts are traded each year.

Historically, aluminium experienced strong growth on the stock market at the beginning of the century, but this rise was halted by the crisis in the automotive and real estate sectors in 2008. Since then, the high of USD 3,000 per tonne reached in 2006 has never been touched again. At that time, it was the drop in world production that caused the price to fall, with a drop in production and surplus stocks. The fall was 65% for this metal, which is the biggest fall in history.

Since then, the price of aluminium has fortunately recovered some of the points lost, but it has still not managed to return to pre-crisis levels. Moreover, it has been weakened by the Covid-19 crisis in 2020 with a new drop in industrial production.

Aluminium trading takes place on the over-the-counter market as well as on regulated markets. Here again, the London Metal Exchange is the reference exchange for aluminium and other metals. Aluminium is traded in the form of contracts with a size of 25 tonnes per contract. The quotation of this value is that of one tonne in US dollars with a minimum variation of $0.25.

Frequently Asked Questions

Who are the main aluminium producing countries?

Currently, the main aluminium producing countries are China with 51.9%, Russia with 6.6%, Canada with 5.4%, United Arab Emirates with 4.3%, India with 3.3%, USA with 3.2%, Australia with 3.2%, Norway with 2.3%, Brazil with 1.8%, Bahrain with 1.7%, Iceland with 1.4%, South Africa with 1.4%, Saudi Arabia with 1.3%, Qatar with 1.2% and Mozambique with 1.1%. Aluminium importing and consuming countries are mainly Western countries, Asia and North America where industries are concentrated.

Is the price of aluminium correlated with other precious metals?

In fact, the price of aluminium may correlate with the price of some other metals such as copper, which is also heavily used in the global industry. However, it does not correlate with other metals such as the more well known precious metals like silver and gold since its use is not at all similar and aluminium is not considered a safe haven.

How to analyse aluminium charts?

It is also interesting to study aluminium stock market charts by carrying out a convincing technical analysis. To do this, you will need to be able to understand and interpret the main technical indicators such as trend, volatility or market liquidity indicators. You can of course display these indicators directly on the charts.

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