SHFE 1710 Aluminum Fluctuates at Highs as Longs Dominate (2017-8-17)    

After the opening, SHFE aluminum futures experienced a slight correction. Although traders in the central China market had the intention to hold prices firm, weak purchase willingness from downstream processing enterprises suppressed overall market transactions. Only hedging traders were willing to purchase in large quantities when premiums were less negative, aiming to widen price spreads for profit. Market offers edged up but remained at relatively low levels. Ultimately, the actual transaction price range in the central China market was around a premium of -170 to -190 yuan/mt against the SHFE aluminum August contract.

[Central Bank Sends Easing Signals; Supply-Demand and Geopolitical Games Limit Aluminum Price Upside Room] Our comprehensive assessment shows that the macro front has improved recently, with the marginal constraints of interest rate hike expectations on the nonferrous metals sector continuing to ease. The proportion of liquid aluminum in China has kept rising. China’s central bank will implement accommodative monetary policies, step up counter-cyclical adjustments, and redouble efforts to expand domestic demand to steer the economy toward sustained, more favorable, and broader-based development. The persistent geopolitical risk premium in the Middle East has jointly underpinned aluminum prices, significantly boosting short-term market confidence. However, the ongoing commissioning of long-term aluminum capacity outside China, the recent softness in traditional end-use demand in China, combined with the repeated shifts in expectations for US Fed interest rate hikes and the uncertainties triggered by geopolitical turmoil in the Middle East, continue to exert certain pressure on the upside room for aluminum prices.

[SMM Aluminum Express] The daily inventory of secondary aluminum ingot in major consumption regions in China was 7,619 mt today, a decline of 198 mt from the previous trading day. Among them, destocking in Foshan region was 217 mt, while inventory buildup in Ningbo region reached 18 mt.