Shanghai aluminum price rise suggest metal to eventually hit $3,000

LME aluminum closed up 0.8% to $2,687 per metric ton, supported by a weak U.S. dollar and a 1.5% increase in aluminum prices in China on higher energy costs, say analysts with Harbor Intelligence.

"Aluminum prices in Shanghai increased today to a 34-month high of $2,645 per mton, which confirms our models’ signal that aluminum prices will highly likely target $3,000 per mton (136 cent/lb) within the next six months,” Harbor says.

Physical demand for primary, scrap and secondary metal weakened on perceptions of high prices and softening underlying demand. Nevertheless, some consumer hedging for 2012 and beyond seems to have occurred, Harbor says, while funds remain on the sidelines.

While looking for $3,000 down the road, however, Harbor says this spring’s correction phase is not necessarily over yet. Harbor also notes Shanghai Futures Exchange prices have increased by 4.9% in the past three weeks on top of visible inventory withdrawals of more than 120,000 tons during the same period.