SMM Daily Aluminium Market Comment and Forecast

SHANGHAI, May 5 (SMM) - At Thursday’s night session, the most-traded SHFE 2306 aluminium contract opened at 18,410 yuan/mt, with the highest and lowest prices at 18,410 yuan/mt and 18,250 yuan/mt before closing at 18,330 yuan/mt, down 115 yuan/mt or 0.62%.

LME aluminium opened at $2,320/mt on Thursday, with its high and low at $2,334.5/mt and $2,284/mt respectively before closing at $2,295.5/mt, a drop of $25.5/mt or 1.1%.

Shortly after the Fed announced its interest rate decision, the US banking crisis has escalated again. Last night, the European Central Bank’s interest rate hike slowed down as expected, restoring market confidence. However, European Central Bank President Christine Lagarde made it clear that the ECB will not suspend interest rate hikes, thus the uncertainty of interest rate hikes still exists, keeping the market risk aversion strong. On fundamentals, the domestic aluminium supply maintained a slight growth trend, and the cost of the industry has dropped significantly, which will deprive aluminium prices of cost support. An increasing amount of molten aluminium has been made into billets rather than ingots, driving the social inventory of aluminium ingots to keep falling. The current downstream operating rates diverge from the inventory data. If the end demand is still lower than expected in the future, aluminium billet inventory may grow, which will drive smelters to produce more ingots instead of billets. As it takes time for weak consumption to be reflected in inventory, aluminium ingot inventory may remain low and continue to drop in May, thus giving some support to aluminium prices. To sum up, SMM predicts that aluminium prices will come under downward pressure, but low inventory may limit the downside room.