SHANGHAI, Sep 26 (SMM) - The most-traded SHFE 2210 aluminium contract opened at 18,790 yuan/mt last Monday, with its weekly low and high at 18,450 yuan/mt and 19,020 yuan/mt respectively before closing at 18,630 yuan/mt on Friday afternoon, down 105 yuan/mt or 0.56% on the week. LME aluminium opened at $2,312.5/mt last Monday, with its weekly low and high at $2,198/mt and $2,312.5/mt respectively before trading at $2,208/mt as of CST 15 on Friday, down $104.5/mt or 4.52% on the week.
On the macro front, the US Federal Reserve raised interest rates by 75 basis points to 3.00-3.25% at its September meeting, in line with market expectations. The pace of interest rate hikes may accelerate in the future. The Fed lowered its forecast for US GDP growth in 2022 to 0.2%. The Bank of England announced to raise interest rates by 50 basis points to 2.25%, which is the seventh hike this year. Frequent interest rate hikes overseas weighed on the commodity market. In China, the average interest rate of corporate loans stood at 4.05% at the end of August, the lowest on record. China will continue to deepen the structural reform of the financial supply side, give full play to the dual functions of monetary policy in terms of volume and structure, strengthen the guiding role of credit policy, and continue to improve the financial system and mechanism to effectively support the real economy.
Fundamentals: According to the latest survey by SMM, the output cuts by aluminium smelters in Yunnan have expanded, with Yunnan Hongtai, Yunnan Shenhuo and Yunnan Qiya slashing their production by up to 18%. The current output reduction in the province has exceeded 10%, and it is expected that the total production reduction in Yunnan will expand to 1.3 million mt in the future. Smelters in Sichuan are now resuming their production, but the output release has been slow. The operating aluminium capacity in China has declined to 40.35 million mt. The coal market was relatively strong as the heating season is approaching, keeping the thermal power costs of smelters at highs. The operating rates of domestic downstream aluminium processing sectors improved slightly, driven by plate/sheet, strip, foil, wire and cable sectors, while the construction extrusion sector remained sluggish. Stockpiling by some downstream buyers ahead of the National Day holiday and hindered shipments from Xinjiang allowed the aluminium ingot social inventory to extend the decline.
Although the macro pressure has been released after US rate hike met expectations, the macro environment remains bearish due to fears of further rate hike amid the stubbornly high inflation. In the short term, expanding production cuts in Yunnan and improved consumption will provide solid support to domestic aluminium prices, while bearish overseas macro factors will prevent LME aluminium from rebounding significantly. The most-traded SHFE aluminium contract and LME aluminium are likely to move between 18,300-19,200 yuan/mt and $2,150-2,380/mt respectively this week.
