Fed Interest Rate Hike Launched, Infrastructure Investment Increasing

SHANGHAI, May 5(SMM) - Futures: The most-traded SHFE 2206 aluminium contract opened at 20,790 yuan/mt on April 29 before closing at 20,890 yuan/mt, up 105 yuan/mt or 0.51%. LME aluminium rose 1.95% or $57/mt to end at $2,985/mt on May 4.

Macro: (1) The Fed released its FOMC resolution, raising rates by 50 basis points (bearish ★★); (2) The FOMC resolution also announced that tapering would begin on June 1 at a pace of $47.5 billion per month. The upper limit of tapering will be raised to $95 billion per month within three months (bearish ★★)

Fundamentals: (1) SMM Aluminium Processing Industry PMI stood at 35.7 on April 29, down 13.4 points on the month (bearish ★★); (2) Recently, two major meetings emphasised to enhance infrastructure construction comprehensively. Recently, construction of many key projects started and infrastructure investment continued to increase (bullish ★★)

Spot: On April 29, holders were active in shipments to gain more cash in the spot market of east China as the May Day holiday approached. The available spot increased with widening discounts. Compared with previous years, the restocking demand in downstream was modest before holiday and enterprises purchased on rigid demand. Some downstream enterprises restocked in advance worrying about the impact of transport in the future.

To sum up, on the supply side, the pandemic recurred in areas where some aluminium plants locate. Although the pandemic did not affect the resumption of production, shipments were seriously hampered. Shipments may arrive after the May Day holiday, leading to the increase in inventory. On the demand side, operating rates in downstream rose as the impact of the pandemic subsided. In the short term, US dollar index fell as Fed interest rate hike launched. Domestic fundamentals are still under pressure, while aluminium prices may move rangebound at low.