The price per tonne of aluminum rose as much as 3.4% on the Shanghai Futures Exchange Thursday, reaching a high not seen in six years. The jump came after the State Council urged production capacity cuts of the metal during a meeting Thursday morning.
While expectations of capacity cuts are well founded, the market may have overreacted to the Thursday comments.
“There’s a danger that market expectations for the supply side are being overpriced at this point,” Yi Zhu, analyst at Bloomberg Intelligence warned. “Certainly we aren’t talking about small numbers, that would definitely alleviate aluminum’s oversupply. But the market is not waiting to find out if all the cuts actually go ahead. We need to wait until we have data for August or September to find out.”