Aluminium Prices to Face Downside Risks amid Oversupply

SHANGHAI, Aug 5 (SMM) - SHFE aluminium closed up 0.14% at 18,190 yuan/mt yesterday, while LME aluminium stabilized at $2,378/mt as of CST 17:13. 
SMM A00 spot aluminium ingots were quoted between 18,370-18,410 yuan/mt yesterday, with the average up 170 yuan/mt from the previous trading day to 18,390 yuan/mt.
On the macro level, Fed officials reiterated their determination to control inflation, and hawkish remarks made market sentiment cautious again, putting non-ferrous metals under pressure. The European energy crisis intensified, which has increased the expectations for overseas production cuts. At the same time, high electricity prices have also given certain support to aluminium prices. Since the beginning of this year, the installation of new energy such as wind power and photovoltaics has accelerated, which coupled with increased investment in power grid, boosted the demand for cables further. In terms of fundamentals, the current aluminium market is still oversupplied.  
In terms of inventory, as of August 4, the domestic aluminium ingot social inventory was 678,000 mt, an increase of 7,000 mt when compared with last Thursday, but a decrease of 54,000 mt when compared with the same period last year, and down 56,000 mt from a month ago. The current aluminium ingot social inventory is still at a low level. The market shall closely watch arrivals in the future.  The domestic aluminium billet inventory stood at 116,400 mt as of August 4, up 8,800 mt from a week ago. 
The domestic operating aluminium capacity is still at a relatively high level. There are few new orders in downstream sectors in the off-season. Given the bearish macro environment and oversupply, aluminium prices are expected to remain under pressure.