79% of Chinese Aluminum Smelters Bullish toward Aluminum Prices This Week, SMM Survey

SHANGHAI, Dec. 22 (SMM) –79% of the 34 Chinese aluminum smelters surveyed by SMM are bullish toward this week’s aluminum prices.

The rest 21% expect prices to stabilize.  

See SMM forecast, please click: LME Aluminum to Find Support from China Production Cuts Next Week

The optimists expect LME aluminum to rise above USD 1,520/mt and SHFE 1603 aluminum to climb above RMB 10,800/mt. Aluminum capacity cuts in China have exceeded 4 million mt/yr since the beginning of this year, which is more than the amount of new capacity. Such huge cuts have allowed aluminum stocks in China’s five major trading markets to fall below 800,000 mt. Spot discounts in China thus narrowed to less than RMB 100/mt over SHFE 1601 aluminum. SHFE aluminum kepti rising, forcing shorts to exit. This in turn pushed SHFE aluminum above the 60-day moving average. Technical side is positive for SHFE aluminum. Negative impact from US Fed’s rate hike has been almost digested, giving some relief to LME aluminum.  

The rest see SHFE 1603 aluminum moving at RMB 10,600-10,800/mt and LME aluminum at USD 1,500-1,520/mt. They expect some longs to exit after SHFE aluminum rise above RMB 10,800/mt, citing falling aluminum costs from lower alumina prices and power tariff subsidy. Besides, some traders will suspend business for this year as year’s end. This, together with poor downstream consumption, will prevent prices from rising. Production cuts in China will give shorts no reason to enter, so aluminum prices are unlikely to fall, either. The downward pressure on LME aluminum from a strong US dollar will weaken now that the US Fed has announced rate hike.