SHFE aluminium to continue to fluctuate at highs this week

SHANGHAI, Mar 23 (SMM)—The most-traded SHFE 2105 aluminium contract started last week at 17,245 yuan/mt and closed at 17,415 yuan/mt, up 145 yuan/mt or 1.02% for the week. Trading volume stood at 1.594 million lots, and long positions increased by 25,700 lots to 232,000 lots. LME aluminium opened last week at $2,175/mt, and closed at $2,215.5/mt as of CST 18:53 last Friday, up$44/mt or 2.03% for the week.

Domestic aluminium inventory growth slowed down. Downstream demand continued to show seasonal recovery. News of output cuts at aluminium smelters in Inner Mongolia had positive impact on market sentiment in the first half of the week. Delivery to overseas LME warehouses exceeded 600,000 mt, but this had little impact on prices. There are multiple short-term negative factors on the macro side. Crude oil prices slumped due to reports of production increases in South America. The US Treasury bond yields continued to rise, and the number of newly unemployed people in the United States began to increase.

SHFE aluminium is expected to remain firm between 16,850-17,900 yuan/mt this week the back of seasonal consumption recovery, but the upside room may be limited. Spot discounts are expected at 0-40 yuan/mt against the SHFE front-month contract. LME aluminium will move between $2,040-2,250/mt.

Investment advice: take a wait-and-see stance; the price spread between futures contracts on the SHFE may remain stable; continue to hold long positions on the LME and short positions on the SHFE for arbitrage.