SHANGHAI, Mar 14 (SMM) – The most-traded SHFE aluminium contract followed LME aluminium up to 24,255 yuan/mt last Monday after opening at 23,400 yuan/mt, but tumbled in the following days with the exit of bulls, touching a low of 21,085 yuan/mt before closing at 22,035 yuan/mt on Friday, a sharp drop of 1,535 yuan/mt or 6.51% on the week. LME aluminium opened at $3,876/mt last week and hit a high of $4,073/mt before trading at $3,499.5/mt as of CST 15 on Friday, down $341/mt or 8.9% on the week.
On the macro front, there were great uncertainties regarding how the Russia-Ukraine conflict will evolve. US Treasury Secretary Yellen said that the United States and its allies were considering additional sanctions against Russia. G7 energy ministers held a special conference call to discuss energy issues, and agreed that the diversification of energy sources should be achieved quickly, including nuclear energy, and some countries need to quickly reduce their dependence on Russian energy.
From a fundamental point of view, the production resumption by aluminium smelters in Yunnan and Guangxi was relatively fast, and the domestic aluminium output recovered. According to SMM data, the domestic aluminium output totalled 2.95 million mt in February, and the daily average output increased by 1,900 mt month-on-month, but decreased by 2,500 mt year-on-year to 105,000 mt. The domestic aluminium output in April is expected to reach the level in the same period last year. The operating rates of aluminium downstream producers picked up, and lower aluminium prices attracted downstream buyers, helping slow down the growth in domestic aluminium ingot social inventory. The export profits and orders of aluminium semis improved, which will drive the domestic aluminium consumption.
From a technical point of view, the most-traded SHFE aluminium contract may consolidate within a narrow range this week. Last week, the weekly K-line of CRB recorded a drop of 2.80%.The prices moved down due to the release of pessimism. The random forest & time series model predicts that the price range of the most-traded SHFE aluminium contract will be [21595, 22640] this week, and the extreme price range will be [21160, 22805]. The LSTM & time series model predicts that the range of SMM A00 aluminium average price will be [21350, 22740] this week, and the extreme range will be [21050, 22840].
In terms of futures technical indicators, the most-traded SHFE aluminium contract will fluctuate at highs this week. Based on the 4-hour K-line, SMM observed a total of 40 technical indicators, of which 25 were neutral, 8 were bullish, and 7 were bearish. Generally speaking, bulls may take the upper hand. The MA, EXPMA, SMA2, SMA, TRMA, and TSMA indicators sent signals of short-term breakthrough, but they will not be enough to change the trend of prices moving sideways. It is still necessary to observe whether there will be a breakthrough signal of the medium and long-term moving averages so as to judge the end of the oscillation trend.
Increasing domestic aluminium supply will put certain pressure on aluminium prices. However, the contradiction between domestic supply and demand is not prominent thanks to recovering domestic consumption and hindered inflows of overseas aluminium ingots. The domestic aluminium ingot social inventory may enter the destocking cycle soon. Expectations of tight aluminium supply amid energy crisis will sustain LME aluminium at highs. The most-traded SHFE aluminium contract and LME aluminium are likely to move between 21,000-23,000 yuan/mt and $3,400-3,700/mt respectively this week.
