50% Chinese Aluminum Smelters See Aluminum Prices Drop This Week, SMM Survey

SHANGHAI, Aug. 23 (SMM) – SMM surveyed 44 Chinese aluminum smelters about their opinions over aluminum price outlook.

See SMM forecast, please click: LME Aluminum to Hover at Highs Next Week, SMM Expects

About half of them expect SHFE 1610 aluminum to fall below RMB 12,300/mt and LME aluminum below USD 1,630/mt, citing many negative factors. SMM data showed China’s aluminum output totaled 2.68 million mt in July, up 106,000 mt MoM, and output in August is expected to rise 13,000 mt MoM. SHFE aluminum will continue face profit-taking by longs. Recent gains in crude oil prices were due mainly to short covering. Market expects no agreement to be reached during the oil output freeze meeting in September. China’s refined oil exports soared. Global fuel oil supply will remain in surplus. Hence, crude oil prices will face downward pressure, which will drag down LME aluminum. The US dollar will continue gaining favor due to US Fed officials’ hawkish speeches.     

Another 45% expect SHFE 1610 aluminum to stabilize between RMB 12,300-12,450/mt and LME aluminum between USD 1,630-1,665/mt. Aluminum stocks in China’s five major markets, though up 19,000 mt on Monday compared with last Thursday, were still at quite low levels. 

The rest 5% expect SHFE 1610 aluminum to rise above RMB 12,450/mt and LME aluminum above USD 1,665/mt. Rising coal and alumina prices will push up aluminum costs, which will likely trigger market speculation by longs. Producers of aluminum extrusion, automotive aluminum plate and strip and light gauge aluminum foil reported growing orders, which will boost aluminum demand. Positions of SHFE 1609 aluminum were 68,466 lots as of Monday, while SHFE aluminum warehouse warrants were just 9,940 mt, so a short squeeze is likely to take place.