SMM Expects Aluminium Prices to Remain in Upward Trajectory as Demand Optimism Prevails, Despite Fundamentals-Driven Bumps along the Way

SHANGHAI, Jan 31 (SMM) – Regarding the near-term aluminium prices, SMM analysts have highlighted several bearish factors that are imminent, but expressed optimism over the overall price trend.

Li Chuntian, one member of SMM’s aluminium research team, warned that the aluminium ingot inventory accumulation through the entire January could weigh heavily on aluminium prices, potentially sending it below 18,500 yuan/mt.

Her views were echoed by traders in the spot market, who said that the inventory growth so far has been lower-than-expected and were concerned that the enormous cargoes in transit would cause considerable supply shock.

Li Jiahui, senior aluminium analyst at SMM, voiced similar concerns, saying that vulnerable coal market will diminish the cost support to aluminium prices in February. She added that the supply side is also detrimental to aluminium prices as closed capacity in south-west China is likely to be restarted with the local power shortages showing signs of easing. In the worst case scenario, aluminium prices could approach 18,000 yuan/mt next month.

However, Frank Liu, director of SMM’s aluminium research team, is optimistic, believing that the seasonal inventory accumulation has been priced in, thus the recent price retreat would only be temporary. In fact, overwhelming optimism over demand recovery, particularly at a time when many local governments have rolled out plans to revive the economy after China lifted its Covid restrictions in December last year, will probably keep aluminium prices in an upward trend.

Nevertheless, Frank Liu warned that aluminium prices will face risks of going down, should the market fail to head into the destocking cycle at the end of February or early March.