Aluminum Price Trends Usually Tell a Story

History clearly shows that aluminum prices move in long term trends. Just like most of commodities, aluminum price trends usually last between one and three decades. This means prices show for a long period of time a clear upward, downward or sideline trend. For example, aluminum prices showed a tightening range trading trend from 1980 to 2004. Prices moved within a range that became smaller as time passed. Then in 2005, aluminum prices entered into a new clear upward trend.

The reason why aluminum price trends are long term in nature is because usually supply and demand are themselves subject to long term developments. For example, the tightening range trading trend of 1980 -2005 was caused by an anemic underlying rate of growth of an economic mature developed world, a technological breakthrough in the production of aluminum (AP 18 and AP 30 technology) and cheap stranded energy that lowered output costs. In the case of the current long term upward trend that started in 2005, the factors behind were strong structural demand of the developing world (headed by China and then India, Brazil, Russia, and others) and supply restraints (given lack of cheap stranded energy, higher capex costs, insufficient and poor bauxite reserves in China, among others).

Aluminum price trends have an overall identified price direction that is far from perfect, especially when these trends are long term. This means prices never go straight up or down. Prices suffer volatility in all trends but within a limited and usually well identified range. Every long term upward trend has several short term counter trends or periods of rest, and vice-versa. The reason behind short term counter trends are: the cyclicality nature of the economy, seasonal patterns, speculation, and unexpected short term industry events such a temporal disruption in supply or demand.

At HARBOR intelligence we believe in the value of identifying the aluminum price trend composition. What’s the long term trend? The short term trend? And what´s behind them?. Once we identify that, we try to assess the attractiveness of prices. Which price levels are really cheap? Which ones are really expensive? Of course these levels are dynamics and so our buying-selling strategies. A long term trend requires a long term strategy. A short term trend a strategy with a short term time frame strategy. We believe going against the trend is usually a high risk and low reward strategy. You never try to catch a falling knife.

The bottom line is that at HARBOR intelligence we recognize that aluminum prices move in long term trends given the long term nature of developments in supply and demand. We also recognize that these long term trends have short term counter trends. That´s why our price outlook and buying recommendations are always designed within the inherent prevailing long and short price trends of the market. As a result of that, we have delivered accurate buying/selling strategies that have delivered considerable value to our clients.