Aluminium continues to rally this week on the LME with prices trading above $2,900/t this morning. Aluminium has gained more than 13% this year. It is the third-strongest performer on the LME after Copper and tin this year, ING's commodity experts Ewa Manthey and Warren Patterson note.

Copper-Aluminium price ratio is nearing record levels

"The metal is supported by tightening supply expectations in China and a broader risk-on tone following the easing of US-China tensions. The recent trade truce between the two economies has reduced a key downside risk to our outlook for industrial metals."

"On the supply side, China’s Aluminium output is close to its self-imposed 45 million tonne capacity cap. China’s Aluminium capacity cap was introduced in 2017 to curb oversupply and reduce emissions. The global Aluminium market looks largely balanced for next year, assuming the cap holds. This is also weighing on exports, keeping markets ex-China tight."

"Outside of China, there have been few recent European or US restart announcements, largely due to difficulties in securing long-term power contracts at competitive prices. However, Indonesian exports are rising fast and may pressure prices next year. Aluminium prices have also drawn support from the broader rally in Copper, with Copper recently hitting a record high. The Copper-Aluminium price ratio is nearing record levels, signalling further potential for substitution from Copper to Aluminium."