Aluminium Futures Closed with Gains Overnight on Intensifying Tension between Ukraine and Russia, Spot Trading Muted

SHANGHAI, Jan 26 (SMM) – The most-traded SHFE aluminum contract opened at 21,190 yuan/mt, with the highest and lowest prices at 21,505 yuan/mt and 21,115 yuan/mt respectively, and closed at 21,450 yuan/mt in the overnight trading, up 350 yuan/mt or 1.51%.

Three-month LME aluminum opened at $3.39.5/mt on Tuesday and closed at $3.95/mt, an increase of $57/mt or 1.88%.

On the macro front, the US Deputy Treasury Secretary said that the US sanctions against Russia has been “ready”. It is reported that the German government hopes to exempt the energy industry when it imposes financial sanctions on Russia. The Chinese Premier said that China will strengthen the macroeconomic policies, highlight the stable growth, and focus on the ranged regulation and directed regulation.

On the fundamentals, an accident occurred in the desulphurisation tower of an in-house power plant of an aluminium plant in Guangxi yesterday. It is under maintenance, and the power supply for the plant has not been affected.

According to customs data, China's aluminium wheel exports in December 2021 were 72,100 mt, a decrease of 12% year on year but up 7 % month on month. The exports totalled 960,700 n 2021, an increase of 18% on the year.

The aluminium stocks across LME-listed warehouses dropped by 14,200 mt to 845,600 mt on Tuesday. The stocks of the warehouse in Kelang, Malaysia fell by over 10,000 mt.

The SHFE aluminium stopped falling and stabilised above 21,000 yuan/mt yesterday morning, as the longs reduced their positions more slowly. The spot transactions weakened approaching the CNY holiday, and the transaction prices stood near the flat level over the SHFE 2202 aluminium contract. The spot premiums shrank by about 10 yuan/mt from the previous day. The quotations of SMM A00 aluminium ended at 21,170 yuan/mt, flat against the February contract.

On the supply side, although the production of aluminium in Yunnan and Shanxi increased, the overall output remained relatively low. In terms of demand, consumption has weakened as the Spring Festival approaches, and stocks began to grow in some areas. The total inventory during the CNY is expected to stand lower than that in the same period in 2021, with the highest level below 1.2 million mt.

The escalation of the Ukrainian-Russian tension has caused the market to worry about the reduction of overseas aluminium supply. Fewer longs in the SHFE market reduced their positions. SHFE aluminium is expected to fluctuate at high levels in the short term. SMM will continue to monitor the domestic risk aversion sentiments before the CNY and the overseas supply changes.