Where Will Aluminum Prices Head After Sudden Downturn? SMM Interviews

SHANGHAI, May 19 (SMM) –July aluminum on the SHFE closed Monday’s night session down 2.79% from 13,620 yuan ($2,196)/tonne hit on May 6.    

 

Why did aluminum prices suddenly take a downturn? Will more losses lied ahead?  

 

Poor market fundamentals were blamed for the price fall. Aluminum capacity in Xinjiang keeps expanding, while downstream consumption did not turn around, exacerbating supply glut. Besides, falling LME aluminum and outflow of speculative fund also contributed to the decline.  

 

LME aluminum has lost nearly 19% from highs hit early this year due to the outflow of inventories from LME warehouses. Falling premiums overseas have triggered market panic, implying more losses on the horizon. This will have a knock-on effect on SHFE aluminum. That said, low availability of deliverable brand aluminum ingot will prevent SHFE aluminum from falling dramatically. SHFE 1507 aluminum contract should range 13,000 -13,400 yuan/tonne in the short term.    

 

Growing aluminum output was the major culprit for lower prices. However, removal of export duty on some aluminum products and a softer US dollar will curtail potential downside room.