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SHFE Aluminium to Remain at Highs, Despite Increasing Inventory

iconAug 23, 2021 14:17
Source:SMM
SHANGHAI, Aug 23 (SMM) - The most-traded SHFE 2109 aluminium contract opened at 20,160 yuan/mt last week, with its weekly lowest and highest level at of 19,660 yuan/mt and 20,575 yuan/mt respectively.

SHANGHAI, Aug 23 (SMM) - The most-traded SHFE 2109 aluminium contract opened at 20,160 yuan/mt last week, with its weekly lowest and highest level at of 19,660 yuan/mt and 20,575 yuan/mt respectively. The contract closed the week at 20,115 yuan/mt, down 15 yuan/mt or 0.07% on the week. The impact of power curtailment on aluminium supply has intensified, while the pandemic has cast uncertainty over demand recovery in the upcoming peak season and hawkish remarks by the US Federal Reserve suppressed market sentiment, leading to greater volatility of aluminium prices.

The US dollar index continued to strengthen and most US Fed officials expressed in their July meeting that the inflation target had been met and that the US Fed could begin to reduce bond purchases later this year, causing LME aluminium to pull back sharply. LME aluminium opened the week at $2,611/mt and fell to $2,516/mt before trading at $2,555.5/mt on Friday afternoon, down $56.5/mt or 2.18% for the week.

A total of 2.12 million mt of annualised aluminium capacity has been lost due to energy consumption control, tight power supply, coal shortage and natural disasters. Qinghai warned last Friday that it might cut power supply further. As such, aluminium supply is at risks of falling further. Although the recovery of consumption in the peak season of September may be slower than usual due to high aluminium prices and power restrictions, the recovery is sufficient to reverse the upward trend of aluminium ingot social inventories, which will offer upward momentum to aluminium prices. However, market should be aware of government control on speculation in the commodity market and unexpected negative macro events. The most-traded SHFE aluminium contract is expected to move between 19,900-20,600 yuan/mt and LME aluminium between $2,530-2,600/mt this week. Spot premiums over the SHFE front-month aluminium contract are expected to stand at 0-40 yuan/mt.

Weekly price forecast for aluminium and alumina

Item

Last week

This week

Change

SHFE most-traded aluminium (yuan/mt)

19,660~20,575

19,900~20,600

LME three-month aluminium ($/mt)

2,516~2,638

2,530~2,600

Spot discounts/premiums in Shanghai (yuan/mt)

-30~20

0~40

Domestic alumina prices (yuan/mt)

2,571~2,592

2,590~2,650

aluminium prices

For queries, please contact Michael Jiang at michaeljiang@smm.cn

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