SHANGHAI, November 29(SMM) – Overnight, the most-traded SHFE 2401 aluminum contract opened at 18795 yuan/mt, with the highest and lowest prices at 18820 yuan/mt and 18755 yuan/mt before closing at 18790 yuan/mt, down 35 yuan/mt or 0.19%. LME aluminum opened at $2213/mt in the previous trading day, with its low and high at $2199.5/mt and $2225.5/mt respectively before closing at $2218.5/mt, up $6/mt or 0.27%.
On the macro level, the US dollar index continued to fall, hitting a new low in three months. The fall of the US dollar and expectations of no more rate hike by the Fed have brought certain support to aluminum prices. Recently, favorable policies are frequently released in China and the real estate market performs well, boosting market confidence, and driving aluminum consumption to grow towards the end of the year. In terms of fundamentals, aluminum ingot inventory has completely entered a downward trend, and it is expected to maintain a weak inventory. Due to aluminum production cuts in Yunnan, domestic operating production capacity has dropped to around 41.8 million mt, easing supply-side pressure. However, due to recent exchange rate fluctuations, the import window has shown signs of opening. The inflow of imported goods will add to domestic supply. The performance of downstream operating rates is weak in the off-season. SMM believes that the rebound in aluminum prices on Monday was mainly driven by sharp inventory reduction. However, the ongoing off-season means that any upward potential will be limited for short-term aluminum prices, which may mainly fluctuate around 19,000 yuan/mt.
On the macro level, the US dollar index continued to fall, hitting a new low in three months. The fall of the US dollar and expectations of no more rate hike by the Fed have brought certain support to aluminum prices. Recently, favorable policies are frequently released in China and the real estate market performs well, boosting market confidence, and driving aluminum consumption to grow towards the end of the year. In terms of fundamentals, aluminum ingot inventory has completely entered a downward trend, and it is expected to maintain a weak inventory. Due to aluminum production cuts in Yunnan, domestic operating production capacity has dropped to around 41.8 million mt, easing supply-side pressure. However, due to recent exchange rate fluctuations, the import window has shown signs of opening. The inflow of imported goods will add to domestic supply. The performance of downstream operating rates is weak in the off-season. SMM believes that the rebound in aluminum prices on Monday was mainly driven by sharp inventory reduction. However, the ongoing off-season means that any upward potential will be limited for short-term aluminum prices, which may mainly fluctuate around 19,000 yuan/mt.
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