Will SHFE Aluminium Maintain Upside Momentum amid Bullish Macro Factors?

SHANGHAI, Jun 28 (SMM) - With the holding of some meetings at national level in China, the macro environment turns more optimistic, pulling up non-ferrous metals prices and relative stocks. As of 14:47 Beijing time, Nanshan Aluminum (600219), Yatai Sci-Tech (002540), Mingtai Al. (601677) and Hongchuang Aluminium (002379) hit limit up.

Macro front:

Today the Publicity Department of the Communist Party of China held a briefing on the "complete, accurate and comprehensive implementation of the new development concept and the promotion of high-quality development". Ou Hong, deputy secretary-general of the National Development and Reform Commission, said that the Central Economic Work Conference and the Government Work Report have made detailed and careful plans for this year's economic target, and the State Council has recently introduced a package of policies and measures to stabilise the economy. In addition, it is also of key importance to keep the supply and price stability of important livelihood commodities, further release the policy effects, effectively stabilise the economy and keep the economy running in a reasonable range.

The Publicity Department also held a series of press conferences on the theme of "China in this decade", saying that China's total economic output had risen from 53.9 trillion yuan in 2012 to 114.4 trillion yuan in 2021, and its share of the world economy had risen from 11.3% to over 18%. The country’s GDP per capita has also risen from US$6300 to more than US$12,000. The building of an innovative nation has achieved fruitful results, with China's innovation index rising to 12th in the world in 2021 and achieving historic leaps in a number of key areas.

The futures market also reacted actively to this news, with SHFE aluminium closing the day with a gain of 2.34% to 19,445 yuan/mt.

In the spot market, SMM A00 aluminium ingot prices stood at 19,240-19,280 yuan/mt, with an average of 19,260 yuan/mt, up 70 yuan/mt from a day ago.

On the fundamentals, the alumina market was quiet, and most manufacturers focused on long-term orders. The sellers were increasingly firm to their prices with rising cost. The downstream players, on the other hand, had sufficient stocks, hence generated little purchasing demand. The mainstream transaction prices stood between 2,850-2,980 yuan/mt as the market was in a stalemate.

In terms of aluminium plate/sheet, many processing companies have lowered their conversion margins amid less new orders from home appliances and construction sectors. Exports of aluminium plate/sheet stood at 361,200 mt in May, and aluminium foil at 131,400 mt. The exports are likely to fall in June.

To sum up, as the shorts left the market after paying off last night, SHFE aluminium was back to the five-day moving average after rebounding from low, and the resistance stood at around 19,800 yuan/mt. With the introduction of stimulus packages to boost consumer confidence, and as aluminium prices have dropped below the break-even point, aluminium prices have rebounded to some extent. SHFE aluminium is expected to move between 18,900-19,800 yuan/mt.