About 51% of Chinese aluminium smelters see aluminium prices rise this week

About 51 per cent of the 45 Chinese aluminium smelters surveyed by SMM expect aluminium prices to rise this week.

Those optimists see SHFE 1606 aluminium rising above RMB 12,000/mt and LME aluminium advancing above USD 1,550/mt. First, aluminium stocks in China’s five major markets fell sharply. It will take only about six weeks for aluminium stocks China’s five major markets to drop to 400,000-500,000 mt at current destocking pace. Aluminium prices used to get support when stocks fell to 400,000-500,000 mt during 2013-2015, and this year will be no exception. Second, improved downstream consumption and Chinese macro-economic data will also bode well for aluminium prices. Third, technical side is positive for SHFE aluminium.

Another 38 per cent see SHFE 1606 aluminium stabilizing at RMB 11,800-11,950/mt and LME aluminium stabilizing at USD 1,530-1,545/mt. First, many smelters and speculators will open short positions for hedging purpose once SHFE aluminium nears RMB 12,000/mt mark. Second, brisk trading in spot market will support SHFE aluminium at the 20-day moving average. Third, alumina prices stopped falling, easing cost pressure at aluminium smelters and thus offering no upward momentum to aluminium prices.

Only 11 per cent are bearish that SHFE 1606 aluminium will fall below the 5-day moving average and LME aluminium will retreat from the 20-day moving average. Upcoming oil output freeze meeting will be all but symbolic without participation of Iran. As such, crude oil prices will find no support, boding ill for LME aluminium. Some Chinese aluminium smelters are planning to resume production, another negative factor.

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