SHANGHAI, Aug. 9 (SMM) – SMM surveyed 44 Chinese aluminum smelters about their opinions over aluminum price outlook.
See SMM forecast, please click: LME and SHFE Aluminum to Remain Trapped in Current Price Range Next Week, SMM Predicts
About 68% of them expect SHFE 1610 aluminum to stabilize between RMB 12,100-12,400/mt and LME aluminum between USD 1,625-1,650/mt. Aluminum stocks in domestic five major markets stopped falling on Monday, up 8,000 mt from last Thursday. China Monetary Policy Report Q2 2016, released by the PBOC on August 5, weakened hopes for interest rate and RRR cuts. If SHFE aluminum keeps rising, prices will face short selling from aluminum smelters for hedging purpose. Despite positive non-farm payrolls, the US dollar index lost upward momentum after breaking through the 40-day moving average, which will give some relief to base metals prices.
Another 25% expect SHFE 1610 aluminum to rise above RMB 12,500/mt and LME aluminum to hold firm at above USD 1,650/mt. SHFE 1610 aluminum has met no resistance from moving averages, and market is dominated by longs. SHFE aluminum warehouse warrants fell to less than 9,000 mt on Monday. Spot premiums in domestic market remain high at RMB 130/mt over SHFE 1608 aluminum. Supply in Shanghai is tighter than in Wuxi and Hangzhou. Tight supply will allow suppliers to hold offers firm.
The rest 7% are bearish that SHFE 1610 aluminum will fall below RMB 12,100/mt and LME aluminum will drop below USD 1,625/mt. Orders at aluminum processors have fallen this month from last month, which will reduce aluminum demand. Aluminum smelters are cutting ratio of aluminum liquid output and increasing output of aluminum ingot. When combined with release from new and restarted capacity, aluminum supply will grow. More aluminum ingots will arrive at major consumption hubs as shipments recover. Spot premiums will narrow with narrowing price spread between SHFE 1608 and 1609 aluminum, which will act as a drag on SHFE aluminum.