SHANGHAI, Dec 30 (SMM) -  As the influence of macro sentiment subsides and the market gradually returns to rationality, the movement of SHFE aluminium is now subject to the fundamentals. With the social inventory beginning to accumulate, aluminium prices continued to move at a low level yesterday, closing down 1.35% at 18685 yuan/mt. 

At present, the fundamentals of the aluminium market are not favourable. 

The aluminium ingot social inventories across China’s eight major markets stood at 493,000 mt as of December 29, up 18,000 mt from last Thursday. However, the figure was 23,000 mt lower than the end of November and 306,000 mt less than the same period last year. Aluminium ingots arrived one after another, leading to inventory accumulation. Increased aluminium ingot output combined with poor downstream consumption in the off-season are likely to push the social inventory into the cycle of seasonal accumulation. At present, it is necessary to focus on the pace of cargo arrivals and the degree of inventory accumulation during the New Year's Day.

The reduction in production due to power rationing in Guizhou is accompanied with the resumption of idled capacity and commissioning of new capacity in other regions. However, according to the latest news, the power rationing in Guizhou tends to expand. According to the notification of Guizhou Power Grid, all aluminium smelters are required to reduce power load by another 300,000 kw, starting from midnight on December 29 and be completed within 3 days. This triggered fears of further output cuts in Guizhou.  

On the demand side, the off-season and pandemic weighed on the performance of aluminium downstream processing enterprises. 

The increase in domestic aluminium production may be lower than expected in December. Spot discounts expanded amid sluggish transactions. The short-term aluminium prices are expected to maintain a rangebound trend, and attention should be paid to downstream pre-holiday stocking and inventory changes.