SHANGHAI, Jul 27 (SMM) - The most-traded SHFE 2109 aluminium contract moved up after opening at 19,480 yuan/mt last week, but then fell back before closing the week at 19,360 yuan/mt, down 100 yuan/mt 0.51%.

LME aluminium started last week at $2,487/mt and failed to break through the previous week's high, closing at $2,495/mt around CST 19:00 on Friday, up 0.24%. 

The coal shortage and power restrictions in Henan were followed by a heavy flood which paralyzed the province.

An explosion occurred at Henan Dengfeng Aluminium Industry, involving an annual production capacity of about 40,000 mt of aluminium. Jiaozuo Wanfang, whose operating aluminium capacity was 370,000 mt, said on Wednesday that its production was affected by the torrential rain.

Aluminium plate/sheet, strip and foil enterprises in Gongyi and other parts of Henan cut production on a large scale because of the flooding, and production resumption has been slow so far. Bauxite mining activities in Henan were mostly halted, and annual alumina roasting capacity declined nearly 1.3 million mt. The flooding in Henan not only affected production through the aluminium industry chain, but it has also disrupted transportation. The Gongyi section of the Lanzhou-Lianyungang Railway line was damaged. Transportation by vehicle and train in Jiaozuo was completely suspended. This also caused about 10 days of delay in the delivery of aluminium products from North-west China to Wuxi.

Aluminium ingot social inventory will probably remain at a low level and continue to decline this week due to fewer arrivals and moderate consumption. The market will focus on the recovery of transportation in Henan and how this will impact the nationwide logistics and the recovery of downstream processing enterprises.

The most-traded SHFE aluminium contract is likely to remain high between 18,900-19,700 yuan/mt. Spot discounts of 20-50 yuan/mt are expected over the SHFE front-month aluminium contract.