TW-International: Aluminum fundamentals remain positive on China demand.

Aug. 25, 2011 - PRLog -- Aluminum prices have dropped in line with the decline in base metal prices over the past few weeks. Weak macroeconomic data from the US and Europe have pressured prices to fall.

However, the declining Chinese inventories present some hope for strong support of prices and even offer the potential for an upside move.

Inventories at the Shanghai Futures Exchange (SHFE) have dropped by 50% since the end of the first quarter of this year TW-International has learned. This might see the start of increased buying as traders try to restock.

The extra capacity has also decreased, in part because of power cuts at smelters and record production costs that have depressed profit margins and provided no incentive for turning on the spare capacity, Barclays informed TW-International.

Recent data available to TW-International shows that aluminum output is up by 27% year on year, for the year to date.

"We expect aluminum prices to find good buying support around current level. We also think that the downside should be cushioned as our valuation model suggests that LME prices are trading close to fair value estimate of about $2,400”, Credit Suisse Private Banking informed Tw-International sources.

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TW-International is a leading independent investment company, based in the heart of Hong Kong. TW-International offers a variety of investment products for institutional, corporate and high net worth investors in equity debt and FX markets.