55% Chinese Aluminum Smelters See Aluminum Prices Stabilizing This Week, SMM Survey

SHANGHAI, Jul. 12 (SMM) – SMM surveyed 44 Chinese aluminum smelters about their opinions over aluminum price outlook.

See SMM forecast, please click: LME and SHFE Aluminum to Lack Upward Momentum Next Week, SMM Says

About 55% of them expect SHFE 1609 aluminum to consolidate at RMB 12,450-12,600/mt and LME aluminum at USD 1,635-1,665/mt, citing two reasons. First, positive US June non-farm employment has reversed weakness since April, which is bad news for investors, given weak Chinese and European economy. Second, while longs are taking the upper hand in SHFE aluminum market, long buying is waning and short momentum is gathering. SHFE 1609 aluminum has found support at moving averages, though. 

Another 18% expect SHFE 1609 aluminum to hold firm at above RMB 12,600/mt and LME aluminum move at above USD 1,665/mt, citing several positive factors. First, flood has hampered aluminum ingot shipment from northwest China to south and east China, forcing smelters to ship to inland areas, such as Gongyi, where consumption is weaker. Second, SHFE aluminum warehouse warrants were just 14,156 mt as of Monday, which were far below positions of SHFE 1607 aluminum, so a potential short squeeze is likely to take place. Third, expectations for monetary stimulus in China and Europe will also benefit base metals. 

The 27% are bearish that SHFE 1609 aluminum will fall below RMB 12,450/mt and LME aluminum will drop below USD 1,635/mt. First, the number of oil drilling wells in the US rose to 351 last week, up 35 from the week ending May. Mounting crude oil stocks in the US and weak demand from China will take a toll on crude oil prices. Second, falling orders at aluminum processors in the off-season will hurt aluminum consumption. Third, release from new and restarted aluminum capacity in China will add to market supply.