Low Inventory To Buoy Up SHFE Aluminium Prices This Week

SHANGHAI, Jun 13 (SMM) – Macro: US non-farm payrolls showed mixed performance in May. The market generally expected that the Fed would pause interest rate hike in June but raise interest rates in July. The president of the European Central Bank made it clear that further interest rate hikes will be made. The US Treasury Secretary once again warned that shrinking liquidity may bring crises to the banking and real estate industries, thus bringing uncertainty to the Fed's future rate hike path.

In China, the State Council proposed to accelerate the introduction of highly targeted and high-value policy measures in batches. A number of large state-owned banks lowered deposit rates, boosting confidence in economic recovery.

Fundamentals: Hydropower generation in Yunnan has picked up, triggering expectations that some local aluminium capacity may be resumed in mid or late June. Even if local smelters are allowed to resume production, output is unlikely to increase significantly in a short period of time as restarts require preparatory work. There is still 200,000 mt of aluminium capacity in Guizhou and Sichuan that has not yet been resumed due to electrolytic cell upgrades and other reasons. One smelter in Shandong is expected to reduce production due to capacity transfer. Domestic aluminium production is difficult to increase month-on-month in June. Downstream operating rates were largely stable last week, but are at risk of falling in the short term due to falling orders in the off-season. Conversion margins in downstream sectors declined amid fierce competition, with small and medium-sized enterprises suffering the most.