SHANGHAI, Mar. 29 (SMM) –About 43% of the 42 Chinese aluminum smelters surveyed by SMM expect aluminum prices to rise this week.
See SMM forecast, please click: Will Rising Momentum Carry on after Aluminum Prices Hit 6-Month High?
Those optimists see SHFE 1605 aluminum rising above RMB 11,800/mt and LME aluminum advancing above USD 1,500/mt, citing positive factors. First, many Chinese aluminum smelters have no plans to restart idled capacity or put new capacity online, so supply will remain tight for the foreseeable future. Second, aluminum stocks in China’s five major markets kept falling, allowing spot discounts to narrow to less than RMB 50/mt. Third, downstream consumption recovered and operating rates at processors are better than the same period last year. Fourth, technical side is positive for SHFE aluminum.
Another 52% see SHFE 1605 aluminum stabilizing at RMB 11,600-11,750/mt and LME aluminum stabilizing at USD 1,475-1,495/mt. Investors are rolling positions to forward month SHFE aluminum contracts, which will keep SHFE 1605 aluminum in check. Continuous price rise will trigger profit-taking at highs, putting downward pressure on prices. On the other hand, shorts will be cautious about entering at current price level, which will put a floor under prices. Chinese A-share market has been hovering around 3,000 points recently, which will also leave SHFE aluminum largely stable.
Only 5% are bearish that SHFE 1605 aluminum will fall below RMB 11,550/mt and LME aluminum will hit new low. SHFE aluminum saw big gains when LME market was closed, with the SHFE/LME aluminum price ratio already up to 7.94. LME aluminum will lack rising impetus after resuming trading, while SHFE aluminum will pull back from highs.