Analysis: Aluminium prices under pressure as supply, inventory grows on weak consumption

SHANGHAI, Jan 17 (SMM) – Aluminium prices are under pressure as Chinese domestic supply continues to increase and inventory grows on weak consumption.

As of January 12, domestic inventory of aluminium stood at 1.76 million mt, maintaining a historical high, as weather conditions in northwest China blocked transportation.

Profits are expected for aluminium producers after losses since November last year, according to Huatai Futures analyst Wu Xiangfeng. This means that more capacities may come online in the near term as few new policies were heard to limit production.

We also maintain our view that the alumina price increase would taper off after the Chinese New Year holiday in mid-February, lowering costs for aluminium producers. 

As we enter the off season for aluminium demand, aluminium inventories are set to accumulate further.

The SHFE 1803 aluminium contract finished 2.9% lower at 14,745 yuan/mt on Tuesday January 16 with open interest at 768,000 lots. This was down 20% compared with the last trading day in 2017, as investors scaled back their bets.

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