SHANGHAI, Jun. 3 (SMM) – Most aluminum smelters completed aluminum ingot shipments to State Reserve Bureau warehouses in late May. Consumption improved during 2Q 2013 due to a seasonal peak-demand period, although only marginally. Sharp declines in arrivals caused aluminum inventories in May to drop by 190,000 mt to 1.08 million mt, and although this level is still considered high, goods available in the market were limited, sending spot aluminum prices higher. LME aluminum inventories in late May hit 5.21 million mt, up over 50,000 mt from early May. This kept LME aluminum prices in check. As such, the SHFE/LME aluminum price ratio is now approaching 8.

Spot aluminum prices found support at RMB 14,600/mt early last week due to falling inventories, and rose further to challenge RMB 14,700/mt later in the week, tracking SHFE aluminum. Although downstream buyers refrained from buying at highs as month-end liquidity crunch bit in, but traders still held offers firm, with discount at RMB 20-50/mt. Small price gap between SHFE aluminum and spot aluminum in Shanghai left little room for arbitrage, keeping spot aluminum supply there in surplus. As a result, prices in Shanghai gained less than in Wuxi and Hangzhou. 

In the coming week, LME aluminum prices are expected to struggle at USD 1,900/mt, while prices for the most active SHFE aluminum contracts will test support at RMB 14,700/mt. Spot aluminum prices will challenge RMB 14,800/mt, with trading expected to pick up slightly.