SHANGHAI, Jul. 22 (SMM) – Overcapacity in aluminum industry is keeping aluminum prices in check. The price gap between SHFE 1308 and 1309 aluminum contracts was no more than RMB 25/mt, implying a lack of confidence over future aluminum prices. SHFE 1310 aluminum contract prices hovered near RMB 14,300/mt, though briefly dropping below the mark. In spot markets, cargo holders held offers firm, preventing SHFE 1308 aluminum contract prices from falling.
Mainstream traded prices of spot aluminum were RMB 14,290-14,390/mt last week. Spot aluminum prices slid to the lowest for the week at RMB 14,290/mt last Tuesday due to falling SHFE aluminum prices, but climbed above RMB 14,300/mt later in the week as SHFE 1308 aluminum contract prices rose. Traders began to hold offers at a discount of RMB 0-10/mt over SHFE current-month aluminum contract in the second half of the week. Falling inventories allowed cargo holders to hold prices relatively firm, but spot discount remained over SHFE 1308 aluminum contract due to the seasonal low-demand period. Spot discount at RMB 0-40/mt and premium of RMB 0-30/mt was reported. Downstream producers were little interested in purchasing against high aluminum prices and poor order books. Despite sagging downstream demand, falling inventories will continue to allow traders to hold offers at a small discount over SHFE current-month aluminum contract in the coming week.
The US will release employment and housing starts figures in the coming week, and although US initial jobless claims two weeks ago were better than forecasts, a firm US dollar will dampen any strong upward momentum in aluminum prices, with LME aluminum prices continuing to hover near USD 1,800/mt. Prices for the most active SHFE aluminum contracts will likely stagnate at RMB 14,300/mt. In spot market, traders will continue to hold quotations firm due to falling aluminum inventories, but spot discounts will remain due to the current seasonal low-demand period. Spot discounts of RMB 0-40/mt and premiums of RMB 0-30/mt are expected over SHFE 1308 aluminum contract prices.