SHFE aluminium to extend gains on positive macro front and fundamentals

SHANGHAI, Jun 16 (SMM) – SHFE aluminium rebounded last week, with the most-traded contract starting the week at 18,455 yuan/mt before rising significantly on Thursday night and Friday with the entry of bulls as market rumours of SRB sell-offs have lacked official confirmation.

The contract closed the week at 19,195 yuan/mt, up 915 yuan/mt or 5.01%. The single-day rise on Friday was 755 yuan/mt or 4.09%. LME aluminium also rebounded, opening the week at $2,455/mt and trading at $2,500.5/mt on Friday afternoon, up $47/mt or 1.91% for the week.

Aluminium prices remain susceptible to the macro front, policies and market fundamentals.

On the macro side, the US CPI jumped more than expected, easing market concerns about tightening of liquidity by the Federal Reserve. In terms of policy, the rumours of SRB sell-offs intensified, but still lack official confirmation.

On fundamentals, consumption remains in the peak season. Social inventory of aluminium ingots dropped by 35,000 mt to 919,000 mt last week. As closed aluminium capacity in Inner Mongolia and Yunnan have not yet resumed, inventory decline will be extended, giving solid support to aluminium prices. There is no need for market participants to be overly bearish before rumoured SRB sell-offs become a reality.

More bulls may enter the market as long as there is no official announcement of SRB sell-offs. The most-traded SHFE aluminium is expected to move between 19,000-19,600 yuan/mt this week and LME aluminium between $2,450-2,540/mt. Spot discounts of 0-40 yuan/mt and spot premiums of 0-20 yuan/mt are expected over the SHFE front-month aluminium contract.