SHANGHAI, May 10 (SMM) –About 44% of the 23 Chinese aluminum smelters surveyed by SMM expect aluminum prices to stabilize this week.
See SMM forecast, please click: Aluminum Prices to Face Further Downward Corrections Next Week, SMM Says
Those neutral players see SHFE 1607 aluminum at RMB 12,300-12,500/mt and LME aluminum at USD 1,570-1,610/mt, citing several reasons. First, the price spread between SHFE 1605 and 1606 aluminum contracts continued expanding, which will dampen buying interest and limit upside room in spot prices. Small spot discounts will offer support to SHFE aluminum. Second, aluminum stocks in China’s five major markets continued falling, albeit at a slower pace. Third, longs might take profit at highs but will also enter after at lows.
Another 30% see SHFE 1607 aluminum rising above RMB 12,300/mt and LME aluminum breaking through USD 1,610/mt. First, disappointing US April non-farm payrolls will dampen expectations for rate hike in June. Second, aluminum smelters have little intention of opening short positions on the SHFE for hedging purpose at current price level. Third, recent price downward corrections will dampen passion for aluminum capacity restarts. Fourth, aluminum stocks in China’s five major markets fell steadily. Spot discounts were small at RMB 10-0/mt over SHFE 1605 aluminum. Strong market fundamentals will offer momentum to prices.
The rest 26% are bearish that SHFE 1607 aluminum will fall below RMB 12,000/mt and LME aluminum will fall below USD 1,570/mt. First, a strong dollar will pressure base metals. Second, falling ferrous metals prices will trigger risk aversion sentiment. Third, some downstream producers will prefer scrap aluminum over primary aluminum against big price spread between the two. Fourth, high SHFE/LME aluminum price ratio will be unfavorable for exports, which will add to supply in domestic market.