Decline in SHFE aluminium prices spurs east China spot trading

SHANGHAI, Aug 16 (SMM) – Spot aluminium trading in east China on Thursday August 16 was more active than the previous day as the drops in SHFE aluminium prices generated some purchases from downstream consumers, SMM learned.

The SHFE September contract traded rangebound at 14,380-14,390 yuan/mt in the morning after it fell overnight. Most transactions in Shanghai were heard at 14,330-14,350 yuan/mt with discounts of 50-40 yuan/mt against the September contract. Transactions were mostly heard at 14,330-14,350 yuan/mt in Wuxi and 14,340-14,350 yuan/mt in Hangzhou.

Transactions in Linyi were heard at 14,300 yuan/mt with discounts of 50-30 yuan/mt against the September contact. Transactions in Gongyi were at 14,370 yuan/mt with discounts of 70 yuan/mt against the September contact.

The US dollar movement would be the major factor directing the market and weighing on aluminium prices in the short term, SMM believes. We expect the most-traded SHFE contract likely to test the 14,000 yuan/mt level.

SMM remains bullish on aluminium prices after September and expects the most-traded SHFE contract to climb to 15,000 yuan/mt in the fourth quarter due to rising costs and the anticipated winter production cut.

Some capacities may be shut down as aluminium prices fall and as costs grow. Such shrinking profits and a slowdown in the development of captive power plants would also decelerate the commissioning of new capacities.

The Guangdong market also saw brisk trading on Thursday with most transactions at 14,440-14,460 yuan/mt. The prices were some 100 yuan/mt higher than those in the east. Premiums against the September contract were at 70-80 yuan/mt.

Primary aluminium inventories in Guangdong rose by some 4,000 mt over the week through August 16 to 240,000 mt, SMM latest data showed. This has yet to bring any impact to the market and prices remained firm.