SHANGHAI, Jun. 20 (SMM) – SHFE 1708 aluminum, the most active contract, skyrocketed nearly 300 yuan/tonne yesterday and gained another almost 150 yuan/tonne today. What fueled the surge? Will gains prove sustainable?
Yesterday’s jump followed the release of Issuing Notice for Inspections on Crackdowns on Illegal Aluminum Projects by Xinjiang Development & Reform Commission.
Today’s gains were driven by rumors that Shandong Weiqiao Group began cutting aluminum production, with 250,000 tonnes to be cut within 10 days.
However, SMM does not expect aluminum prices to carry on upward momentum for much longer.
The document released by Xinjiang Development & Reform Commission will redefine illegal capacity, which will dampen market sentiment. Moreover, the price rise occurred just at a time when prices need technical rally following continuous declines. Besides, the production cuts in the rumor are too small to have any big impact on market supply and prices, SMM explained.
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