Analysis: Aluminium futures up on risk aversion

SHANGHAI, Feb 8 (SMM) – SHFE aluminium outperformed its nonferrous peers overnight and today, registering a 0.28% increase when the losses in copper, zinc, lead, tin and nickel all exceeded 1%.

SMM believes this is mostly due to investors pricing in the weak fundamentals of aluminium much earlier on. As Chinese New Year approaches, shorts decided to cut their positions to avoid risks following negative profits seen among smelters.

In fact, some smelters in Henan province have said they planned to delay the restarts after the winter heating season ends on March 15 due to the losses.

We expect SHFE aluminium to stay rather firm before the Chinese New Year holiday next week as investors continued to square their positions.

Post holidays, however, prices would still fall as aluminium supply would ramp up, even if at a slower pace. But the downward room may be limited in the short term as aluminium demand is set to be released more quickly after the winter heating season.

On the cost front, we see room for alumina prices to go down, as well as prebaked anode due to lower electricity prices.

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