Sharp Increase in Demand for Aluminium Ingots Made Aluminium Prices Bottom Out

SHANGHAI, Apr 19 (SMM) - The most-traded SHFE 2305 aluminium contract rose after falling during March 13-April 10, hitting the lowest and highest prices at 17,920 yuan/mt and 18,895 yuan/mt respectively before closing at 18,615 yuan/mt on April 10, up 415 yuan/mt or 2.28% on the month. Three-month LME aluminium moved between $2,250-2,450/mt and traded at $2,325/mt on April 6, up 15 yuan/mt or 0.65% on the month.

In March, under the interest rate hike expectations and the falling costs, aluminium prices declined and stabilised below 18,000 yuan/mt. After the interest rate hike was implemented, the macro sentiment gradually recovered and the operating rates of downstream sectors including aluminium plate/sheet, strip, foil, and industrial extrusion increased. As such, the aluminium inventory fell significantly by 180,000 mt in March, supporting aluminium prices to rebound and hit the highest point at 18,900 yuan/mt. Entering April, downstream enterprises mainly purchased on rigid demand, hence the aluminium prices stabilised at 18,600 yuan/mt.

In the spot market, discounts of SMMA00 aluminium ingot against the SHFE front month contract in east China stood at 55 yuan/mt, and that in central China was about 70 yuan/mt. The discounts in both regions narrowed after expanding. In mid-to-late March, due to the high aluminium prices, the spot discounts of SMM A00 expanded to 70 yuan/mt at the end of March. And the discounts of aluminium prices in Gongyi against the SMM A00 aluminium price in east China hit the highest point at 120 yuan/mt. In south China, the downstream orders resumed in March but the market supply was tight. As such, the spot prices in south China were in premiums against the SMM A00 aluminium price, and the price spread between south China and east China was close to 200 yuan/mt at most.

In April, the discounts in various places have recovered, and the price spread between south and east China has gradually fell. The overall demand for aluminium is still in the recovery stage and the inventory of aluminium ingots will decline further in April, which will provide some support for spot prices. It is expected that aluminium prices will still move rangebound.