SHANGHAI, Jul. 19 (SMM) – SMM surveyed 36 Chinese aluminum smelters about their opinions over aluminum price outlook.

See SMM forecast, please click: Aluminum Prices to Extend Gains as Stocks Hit Nearly 7-Year Low, SMM Says

About 67% of them expect SHFE 1609 aluminum to fall below RMB 12,500/mt and LME aluminum below USD 1,648/mt, citing three reasons. First, China’s alumina output grew 2.99% YoY in June, adding to supply and pushing alumina prices down. This will weaken cost support for aluminum prices. Second, China’s aluminum output entered positive growth territory in June on a year-on-year basis after fall consecutive months of year-on-year fall, due to release from new and restarted capacity, and will add another 100,000 mt in July. Third, operating rates will fall at aluminum plate, strip, foil and extrusion producers in July due to the off-season, except aluminum wire & cable producers. Sluggish consumption has pushed up aluminum billet stocks. These negative factors will trigger short selling. 

The rest 33% expect SHFE 1609 aluminum to stabilize at RMB 12,500-12,650/mt and LME aluminum at USD 1,650-1,670/mt. On the one hand, while aluminum supply in China will be ample and even in surplus in the long run, aluminum stocks will hover near record lows in the short term. This will keep shorts cautious about entering. On the other hand, last week’s rise in nonferrous metals prices was driven mainly by large inflows of capital. Growing geopolitical risks, such as recoup in Turkey and terrorist attack in France, will turn investors to the US dollar and gold as safe harbor.