Hedge funds now eye aluminium

With aluminium lagging other base metals’ spiral in the past year, hedge funds are eyeing this white metal as the next growth avenue for high profitability. Until recently, aluminium was considered a subsidiary to copper for portfolio rebalancing in base metals. Global investment fund houses have gradually started booking it on the benchmark London Metal Exchange （LME）.

Generally, aluminium prices move in hand with copper, the LME market leader. The two metals compete in application industries, especially the electrical sector. But in the past year, a recovery in the US economy coupled with supply deficit forecast by the US-based International Copper Study Group （ICSG）, raised supply concerns, thereby offering more potential of returns on investment for fund houses. Now, fund houses have realised that most base metals, barring aluminium, have already hit the high price forecast, with little upside bias left in those segments, said an analyst.

Aluminium is the only metal left behind in the race for growth in base metals in the past year, which is why global hedge funds are seriously looking at it, said Jayanta Roy, an analyst with rating agency Icra.