China Macroeconomics & Academia

Christopher Balding

Macroeconomics

<p>We believe downward price pressures are evident in aluminum pricing. This is backed up by futures markets and LME duration spreads. Aluminum inventory remains high, yet operating rates are not increasing as a result of this high inventory. Output sectors have not seen a downturn in production, YTD output through April is in the negative. We believe this creates an environment where prices will come under increasing pressure during the next 3-6 months. Finally, given the high degree of correlation with offshore aluminum markets and the new price discovery role of Chinese markets, this allows investors to trade the Chinese markets while not actually trading Chinese assets.</p>

We believe downward price pressures are evident in aluminum pricing. This is backed up by futures markets and LME duration spreads. Aluminum inventory remains high, yet operating rates are not increasing as a result of this high inventory. Output sectors have not seen a downturn in production, YTD output through April is in the negative. We believe this creates an environment where prices will come under increasing pressure during the next 3-6 months. Finally, given the high degree of correlation with offshore aluminum markets and the new price discovery role of Chinese markets, this allows investors to trade the Chinese markets while not actually trading Chinese assets.

Chinese Aluminum Prices Look to Fall