Aluminium Price Rally Turned out to Be Transitory due to Growing Supply Pressure and Weak Demand

SHANGHAI, Jul 1 (SMM) - In the absence of sustainable positive factors, SHFE aluminium fell back again yesterday following a brief rally. SHFE aluminium closed down 1.42% at 19,060 yuan/mt overnight.

China’s manufacturing PMI was 50.2% in June, an increase of 0.6 percentage point from the previous month, indicating that the manufacturing industry has returned to the expansion territory. With the improvement of domestic pandemic situation and the implementation of a package of stimulus policies, the Chinese economy has recovered at a faster pace.

However, the end demand remains weak. As the off-season is coming, the recovery of consumption may be affected. According to SMM data, the growth rate of domestic aluminium operating capacity slowed down in June. The domestic operating aluminium capacity is estimated to have climbed 400,000 mt MoM to around 41 million mt by the end of June.

The aluminium ingot social inventories across China’s eight major markets totalled 734,000 mt as of June 30, down 17,000 mt from last Thursday and 189,000 mt from the end of May. The destocking of aluminium ingots slowed down.

SMM spot aluminium ingots were quoted between 19,210-19,250 yuan/mt yesterday, with the average down 140 yuan/mt from the previous trading day to 19,230 yuan/mt.

Given the pessimistic macro sentiment and the fact that consumption has not improved significantly, SHFE aluminium may move between 18,900-19,800 yuan/mt.