SHANGHAI, Jul. 1 (SMM) – SHFE 1310 aluminum contract prices were more resilient than LME aluminum last week, moving within a RMB 14,200-14,350/mt price range. China’s A-shares had little upward momentum, preventing the most active SHFE aluminum contract from climbing above RMB 14,300/mt. SHFE 1310 aluminum contract sank to RMB 14,160/mt, close to the lowest in nearly four years. SHFE aluminum will remain weak in the absence of positive news.

LME aluminum inventories surged to 5.45 million mt last Wednesday, up 34,000 mt on a weekly basis. Mounting inventories kept LME aluminum prices in check. Spot aluminum stocks in China, however, fell below 920,000 mt due to fewer deliveries from smelters, which helped keep domestic aluminum prices relatively stable. The SHFE/LME aluminum price ratio has now broken through 8.0, but premiums of spot aluminum prices overseas (CIF) over LME aluminum prices remain high, unfavorable for imports.

Despite fewer goods arriving, traders were anxious to sell due to tight liquidity at the mid-year point. Downstream producers purchased in modest amounts early last week, holding traded prices RMB 0-20/mt above SHFE 1307 aluminum contract prices. Traders rushed to liquidate stocks later in the week as SHFE aluminum fell, dragging spot aluminum prices down below RMB 14,400/mt. Markets turned quiet in the second half of the week as liquidity tightened.   

In the coming week, aluminum prices will move within tight ranges as economic reports will be mixed, with LME aluminum prices testing resistance at USD 1,800/mt, and prices for the most active SHFE aluminum contracts struggling at RMB 14,300/mt. Despite low buying interest, limited supply will help cargo holders hold quotations flat with or even higher than SHFE current-month aluminum contract prices, with spot aluminum prices testing resistance at RMB 14,400/mt.