Buffeted by the ongoing trade dispute between the US and China, aluminium's challenges are also reflected in the average global manufacturing purchasing manager index, which is hovering two points below levels that would historically point to year-over-year aluminium price increases.
"In our view, the trade dispute has shifted from economic issues like the bilateral trade deficit to more strategic disagreements," the bank said.
BofAML analysts do not believe this is a good time to increase base metal exposure.
While a de-escalation between the US and China is still possible, a comprehensive resolution does not seem imminent.
"Against this backdrop, we note China's relatively disappointing success in stimulating the economy in recent months. Given the weak external backdrop, this highlights the bind authorities are in domestically: one the one hand, there is a desire to rebalance the economy to less commodity intensive consumption, while on the other hand, traditional commodity-intensive fixed-asset investment stimulus is becoming less effective," the bank said.
"Where does this leave us? China accounts for between 49% (lead) and 56% (aluminium) of global demand, so if the trade dispute dragged on, this would cap upside to prices. As such, we remain cautious the complex for now."
BofAML noted global aluminium production had slipped 0.4% year-on-year in the period to date, with figures in line with its view of a global market deficit. Implicit in these estimates is a balanced Chinese market, which masks however that the country is oversupplying the Western world by about 3Mt or 10% of domestic supply in aluminium units.
"As such, and beyond the trade dispute, this suggests that upside to aluminium quotations is limited unless China shutters more production. Against this backdrop, the recently published list of unqualified capacity is encouraging and if that initiative led to another round of curtailments, aluminium fundamentals could improve."
In the domestic US market, the recent tariff relief for Canadian aluminium shipments reduces costs for consumers. However, the current structure of duty-paid and duty-unpaid premia is expected to prevail, because for instance Russian aluminium is still liable to a 10% levy.
Meanwhile, global alumina production has risen by 3% in the period to date, led by China.
Yet about 5.8Mt of capacity has recently been shuttered in the country, suggesting supply will be more subdued going forward. Linked to that, China's alumina prices have outperformed those in the Western world.
"This should lead to rising Chinese imports, which would also support quotations in World ex-China. Costs are a silver lining to an otherwise gloomy backdrop and could limit the downside to aluminium quotations," BofAML said.