Short-Term Aluminium Price Outlook Remains Bullish on Policy Support

Published: Aug 30, 2021 14:14

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SHANHGAI, Aug 30 (SMM) – The most-traded SHFE 2110 aluminium contract hit a new record high of 20,910 yuan/mt last week, closing the week up 780 yuan/mt or 3.88%.

SHANHGAI, Aug 30 (SMM) – The most-traded SHFE 2110 aluminium contract hit a new record high of 20,910 yuan/mt last week, closing the week up 780 yuan/mt or 3.88%. Long positions increased by 114,000 lots to 346,000 lots. LME aluminium also hit an all-time high and traded at $2,652.5/mt as of CST 19:00 last Friday, up 3.82% on the week. The surge in SHFE aluminium opened the import window slightly.

Changji in Xinjiang issued a notice last Thursday, requiring that the total monthly output of five local aluminium enterprises must not exceed 238,000 mt. SMM estimates that the annualised operating aluminium capacity in Changji shall be reduced by nearly 360,000 mt in order to meet the requirements set in the government document, which will affect 150,000 mt of aluminium output. The State Reserve Bureau (SRB) announced last Friday that it will begin to release the third batch of aluminium ingots (70,000 mt) into the market soon, but the volume is lower than expectations and that in the second batch. The National Development and Reform Commission (NDRC) issued a notice on improving the tiered electricity price policy for aluminium industry, demanding that preferential electricity price policies be strictly prohibited. This triggered market concerns about rising electricity costs in Yunnan and other regions.

Aluminium ingot social inventory increased by 13,000 mt last week, but the increase was limited. Market sentiment remains bullish, with open interest of SHFE aluminium contracts at historically high.

The short-term aluminium price outlook remains bullish. However, market still needs to pay attention to three aspects: 1. the impact of the US Fed’s attitude at the upcoming Jackson Hole annual meeting on market liquidity; 2. the impact of energy control policies on aluminium supply; 3. the impact of changes in downstream consumption in the peak season on market sentiment.

The most-traded SHFE aluminium contract is expected to move at highs between 20,500-21,400 yuan/mt this week. Spot discounts against the SHFE front-month aluminium contract are expected to widen to 0-40 yuan/mt.

Weekly price forecast for aluminium and alumina

Item	Last week	This week	Change
SHFE most-traded aluminium (yuan/mt)	20,160~20,890	20,500~21,400	↑
LME three-month aluminium ($/mt)	2,557.5~2,652.5	2,530~2,680	→
Spot discounts/premiums in Shanghai (yuan/mt)	15~-10	-40~0	→
Domestic alumina prices (yuan/mt)	2,667~2,757	2,800~2,950	↑

SHFE aluminium prices

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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