SMM aluminium market comment and forecast (July 12)

SHANGHAI, Jul 12 (SMM) –The most-traded SHFE 2308 aluminium contract opened at 18,085 yuan/mt overnight, with its low and high at 18,035 yuan/mt and 18,130 yuan/mt before closing at 18,050 yuan/mt. It fell by 90 yuan/mt or 0.5%. LME aluminium opened at $2,153.5/mt on Tuesday, with its low and high at $2,153/mt and $2,191/mt respectively before closing at $2,168.5/mt, up $14.5/mt or 0.67%. 

On the macro front, with core inflation strong, several Fed officials said on Monday that interest rates may need to be raised further to reduce inflation that is still too high, but the current monetary policy tightening cycle is getting closer and closer to its end.

In terms of fundamentals, the restarts of idled aluminium capacity in Yunnan Province will translate into greater supply pressure in late July. At the same time, there were rumours of power rationing in Sichuan. Aluminium ingot social inventory is expected to accumulate further as downstream consumption is in the off-season. In the short term, the resumption of aluminium production in Yunnan and weakening consumption margin will suppress aluminium prices, but low inventory on a year-on-year basis will keep SHFE front-month contract relatively resilient.

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