SHANGHAI, Dec 5 (SMM) – Despite output cuts across primary aluminium producers, aluminium prices across Chinese markets are likely to see some downside room in the remaining days of the year as demand weakens and new capacity comes online, SMM expects.
On Friday night, the most-traded SHFE January 2019 aluminium contract climbed to 14,000 yuan/mt as BRICS leaders declared common stand on the reform of the World Trade Organization (WTO) on the sidelines of the Group of 20 (G-20) summit. This drove shorts to cut their bets, with open interest down over 9,000 lots in 10 minutes.
The contract continued its strong performance on Monday as a ceasefire in the US-China trade war improved risk sentiment among investors.
As the US-China trade truce took a back seat, the contract failed to extend its gains on Tuesday, suggesting limited upward momentum.
Primary aluminium supply and demand are both declining across Chinese markets. The Aluminum Corp of China Ltd. (Chalco) said on late Friday that it will cut 470,000 mt of aluminium capacity, which grew announced aluminium capacity cuts in China thus far this year to 2.76 million mt. SMM learned that 2.3 million mt of which has been shut.
Besides, the downtick in social inventories of primary aluminium in China has continued for 34 consecutive weeks as of Tuesday, SMM data showed.
In the meantime, sluggish consumption across end-users held aluminium processors back from purchasing aluminium ingot.
In terms of raw materials, aluminium prices are expected to receive little cost support this winter as less strict production curbs could limitedly bolster prices of prebaked anode and aluminum fluoride. Recent dips in traded prices of alumina cemented the anticipation of waning cost support.