SMM Analysis: China Alumina Supply & Demand Balance in H2 2017

[SMM Aluminum Express News] Hydro has signed a five-year agreement to supply approximately 85,000 tonnes of low-carbon aluminum wire rod to Nexans between 2026 and 2030, supporting Europe's electricity grid expansion. The aluminum, produced using 100% renewable energy in Norway, will be used in medium-voltage power grids, overhead transmission lines, and subsea power cables. The agreement also supports Hydro's expanded wire rod capacity at its Karmøy smelter and strengthens long-term supply security for Europe's energy transition.

[SHFE and LME Aluminum Prices: Low-Level Consolidation and Recovery as Destocking Positives Offset Overseas Capacity Negatives] On the macro front, US June nonfarm payrolls significantly missed expectations, causing the market to push back the timing of Fed rate hikes. A weaker US dollar provided valuation support for nonferrous metals. The US and Iran resumed nuclear talks, and the geopolitical risk premium continued to narrow, to some extent capping the upside room for commodities. Meanwhile, expectations of new overseas aluminum capacity coming on stream formed a medium- and long-term supply bearish factor. Domestic positives stood out. The proportion of liquid aluminum continued to rise, and aluminum ingot warehouse withdrawals hit a four-year high over the past week. The pace of inventory destocking significantly accelerated, providing support for the bottom of SHFE aluminum. Amid a mix of bullish and bearish factors, overseas positives from a weaker US dollar and negatives from supply/geopolitics offset each other. LME aluminum, after an earlier oversold decline, saw its downward momentum slow, and in the short term, it mainly undergoes low-level consolidation and recovery. Supported by rapid destocking, the probability of China’s market underperforming LME aluminum is low. SHFE and LME may see slight divergence, and a one-sided weak market is unlikely to persist.

[SMM Aluminum News Flash] The daily inventory of secondary aluminum alloy ingot in major consumption areas in China was reported at 15,900 mt today, with a destocking of 830 mt from the previous day. Among them, Foshan contributed the major decline, with a single-day destocking of 696 mt.