Aluminium Prices Stabilised Following PBoC's RRR Cuts

SHANGHAI, Dec 13 (SMM) - The most-traded SHFE 2201 aluminium contract opened at 18,925 yuan/mt last week, with the weekly highest and lowest at 19,075 yuan/mt and 18,605 yuan/mt respectively before closing at 18,900 yuan/mt on Friday afternoon, down 0.4% on the week. LME aluminium opened at $2,622.5/mt last week and moved within a narrow range before trading at $2,635/mt as of CST 15 on Friday, up $19/mt or 0.73% on the week.

On the macro front, the People’s Bank of China announced RRR cuts in order to increase liquidity to cope with the economic downturn in the fourth quarter, which was in line with market expectations, and thus market reaction was insensitive.

In terms of fundamentals, there is a lower possibility of aluminium smelters in Inner Mongolia reducing production during the Winter Olympics. Smelters in Yunnan are still resuming production. Consumption recovery after alleviation of the power rationing led to a sharp decline in aluminium ingot social inventory last week, but the market still has concerns about the sustainability of consumption. In terms of costs, the decline in alumina prices reduced the costs of aluminium smelters.

The most-traded SHFE aluminium contract is expected to fluctuate between 18,500-19,100 yuan/mt and LME aluminium between $2,550-2,650/mt this week. Spot discounts are expected to narrow to 20 yuan/mt before delivery of the SHFE 2112 contract, but may widen to 70 yuan/mt following the delivery.