Citi: Aluminum Prices Expected to Bottom Out Short-Term, Projected to Rise to $3,500 by Year-End

On July 3, Citi stated that it expects aluminum prices to bottom out within the next month, followed by a gradual recovery to a range of $3,300 to $3,500 per ton between September and December. The bank's assessment is based on multiple factors, including a dovish shift in Federal Reserve policy, declining real interest rates, improved demand outlook, and a continued decrease in inventory based on consumption metrics. Recently, the decline in aluminum prices primarily reflects weaker-than-expected demand, a slowdown in visible inventory depletion, easing geopolitical risks, concentrated liquidation of speculative and physical positions, and rising market expectations for increased future supply. Over the past month, aluminum prices have dropped about 20% from approximately $4,450 per ton, shaking the upward trend that had lasted for more than a year. However, Citi believes that it is currently not suitable to short aluminum prices, as the market was already in a supply deficit state before the recent shocks, and new supply is unlikely to catch up with demand growth in time. The bank also noted that concerns about a rapid return of supply from the Middle East may be exaggerated.