LME and SHFE aluminum both closed with losses, but bullish macro sentiment may buoy SHFE aluminum this week

At last Friday’s night session, SHFE 2308 aluminum contract opened at 18370 yuan/mt, with low and high at 18210 yuan/mt and 18370 yuan/mt, closing down 0.19% at 18265 yuan/mt.

LME aluminum opened at $2279/mt last Friday, with low and high at $2263/mt and $2292/mt before closing down 0.42% at $2273.5/mt.

In terms of macro, the US CPI data fell more than expected, thus market expectations for the Fed's interest rate hike weakened, sending the US dollar index lower and driving non-ferrous metals to generally rise last week. Market is pinning hopes on economic stimulus policies in China. Massive capacity restarts in Yunnan and small-scale reduction in production in Sichuan will have little impact on near-term aluminium supply. Yet, high temperature has ignited fears over power rationing in south-west China. Aluminium smelters’ costs rose due to alumina price rally. On the demand side, the domestic aluminium downstream production remain weak amid falling new orders. The social inventory of aluminium ingots accumulated, and spot premiums turned into discounts. The most-traded SHFE aluminium 2308 contract contract and LME aluminium are likely to move between 17,500-18,700 yuan/mt and $2,120-2,280/mt respectively this week.

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