SHANGHAI, Jun. 12 (SMM) – SHFE 3-month aluminum contract has lost 6.5% since early May. What’s behind the tumble? Will more losses lied ahead?
COFCO Futures
The price fall was caused by aluminum capacity expansions, poor demand, lower power and alumina costs. Chances for dramatic drop are small, though. Some smelters are jointly hoarding goods in an attempt to support prices, reducing market availability. Relatively ample liquidity in the market will also lend support.
Shanghai CIFCO Futures
Downstream producers began to source only as needed in June, exacerbating oversupply. This dragged spot prices down, creating a ripple effect on SHFE aluminum. The supply glut will worsen further in Q3 with the arrival of the off-season. However, lower prices have incurred losses on some smelters and supply of deliverable goods is tight, which should prevent prices from deep fall.
Galaxy Futures
The price fall was due to market panic and capacity expansions. Any potential downside room should be marginal.
SHFE 3-month aluminum contract took a downturn after hitting 13,620 yuan ($2194) per tonne on May 6, and closed at 12,740 yuan per tonne as of June 11.
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