As sentiment turns increasingly bullish towards aluminum amid a backdrop of tight supply, analysts say the once-shunned base metal is finally at a turning point.
The metal has been trading near seventeen-month highs above $2,000 per ton in recent weeks and entered a bull market in late July, up more than 20 percent since a 2014 low of $1,677 in February.
"We're probably now at a point where the aluminum market may be turning and that has everything to do with supply shutting down in China and as supply-demand re-balances across the entire industry," Gaurav Sodhi, resources analyst at Intelligent Investor, told CNBC on Thursday.
"Over the last five or eight years, China has massively increased its supply of aluminum and that's depressed prices across the sector. But that's changing a little a now. As China focuses on energy-intensive activities, they are changing the economic mix of production and that's forcing a lot of aluminum production to be shut down," Sodhi continued.
Smelter closures in China, the world's leading aluminum producing country, resulted in a two million ton capacity decline from the end of 2013 to May this year. That saw global daily average output fall by 500 tons in June from May, according to the International Aluminum Institute. Meanwhile, Rusal, the world's largest aluminum producer, said its first-quarter production declined by over 2 percent.