Where Will Aluminium Prices Head After Three Consecutive Days of Decline Amid Weakening Fundamentals

SHANGHAI, Jan 24 (SMM) – SHFE aluminium moved all the way up in early January, but began to fall last week, and closed the morning trading on January 24 down 2.21%.

The spot prices showed basically the same trend as the futures prices. On January 24, the SMM A00 aluminium price was 21,130 yuan/mt, which was 520 yuan/mt lower than on January 19.

The previous price surge was driven by the European energy crisis and the continuous destocking in China. However, aluminium prices entered the downward track amid weakening fundamentals. According to SMM statistics, as of January 24, the domestic social inventory of aluminium ingots was 725,000 mt, a decrease of 1,000 mt from last Thursday. The inventory in Shanghai began to rise, and the inventory in Nanhai continued to accumulate. Hangzhou, Gongyi, Tianjin, Chongqing, and Linyi saw no change in their inventory. Inventory in Wuxi declined, mainly due to fewer arrivals. Last Thursday, there was an accumulation of 2,000 mt of inventory, which marked a turning point in the recent destocking period.

Downstream consumption declined in late January as the Spring Festival is approaching, and the high price of aluminium also suppressed the stocking enthusiasm. The hindered transportation by truck due to the COVID-19 also resulted in fewer outflows from warehouses. The operating rates of both aluminium billet plants and aluminium extruders declined with the approaching of the Spring Festival, and the social inventory of aluminium billets continued to accumulate. The closures of processing enterprises in Qinghai and Henan for the Spring Festival hurt the demand for aluminium liquid. It is expected that the domestic aluminium ingot social inventory will enter a regular accumulation cycle during the Spring Festival due to increased supply and weaker demand. It is still necessary to be alert to possible exit of bulls before the Spring Festival and the energy shortage in Europe.