What Fuels Aluminum Price Comeback? More Gains on the Way? SMM Reports

Published: Nov 22, 2016 11:01

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Aluminum prices have staged a strong comeback after last week’s heavy battering, with SHFE 1701 aluminum closing up 4.02% at 14,090 yuan/tonne as of November 21.

SHANGHAI, Nov. 22 (SMM) – Aluminum prices have staged a strong comeback after last week’s heavy battering, with SHFE 1701 aluminum closing up 4.02% at 14,090 yuan/tonne as of November 21.

Aluminum stocks in China’s five major markets fell again on Monday after growing for one month, the main reason behind the price rise, SMM understands. Besides, expectations for tightening transport capacity also contributed to price gains, SMM added.

SMM statistics showed aluminum stocks in China’s five major markets totaled 264,000 tonnes as of November 21, down 15,000 tonnes from November 17, due mainly to low arrivals and growing warehouse withdrawals.

It is expected that smelters will turn from truck transport to railway transport against snowfalls in parts of northwest China, which will exacerbate already tight railway capacity and tighten aluminum supply in consumer markets. Rail freight charges are now around 690 yuan/tonne from Xinjiang to Shanghai and around 790 yuan/tonne to Guangzhou, and are expected to be hiked in the future.

Aluminum suppliers in spot market kept raising offers on November 21, with offers up to around 15,250 yuan/tonne. Mainstream traded prices were 15,150-15,190 yuan/tonne in south China market on November 21, 580-660 yuan/tonne higher than in east China, with the price spread between the two regions expanding further. Aluminum premiums in south China should stay high this week.

Falling inventories, firm offers in spot market and bullish sentiment allowed aluminum prices to rebound. However, SMM learned arrivals into major consumer markets did not fall sharply. The price rally was due mainly to market speculation.

Anyway, with market sentiment still optimistic, SMM sees SHFE 1701 aluminum advancing further to 14,500 yuan/tonne in the short term.

Most downstream producers are working through raw material stocks on hand and buying only as needed in response to big volatility in aluminum prices, SMM learned.

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aluminum prices

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