36% Chinese aluminium smelters see aluminium prices rise this week

SMM surveyed 37 Chinese aluminium smelters about their opinions over aluminium price outlook.

About 36 per cent of them expect SHFE 1609 aluminium to hold firm above RMB 12,600/mt and LME aluminium return above USD 1,665/mt, citing several factors. First, Chinese yuan’s big depreciation following Brexit vote allowed domestic metals to rise significantly, with nickel and silver once hitting daily upside limits. Bullish sentiment will allow SHFE aluminium to rise further. Second, manufacturing PMIs for June from the UK, Germany and France were positive. Third, worker strike threat in Norway and crisis in Venezuela will favour crude oil prices. Fourth, the US dollar index will face further downward corrections.

Another 36 per cent expect SHFE 1609 aluminium to fluctuate at RMB 12,400-12,600/mt and LME aluminium move at USD 1,645-1,665/mt for several reasons. First, spot premiums in east China market expanded markedly on Monday due to low aluminium stocks, which will support SHFE aluminium. Second, both shorts and longs entered when SHFE aluminium rose to recent highs. The intense game between shorts and longs will leave SHFE aluminium fluctuating in current range.

The 28 per cent are bearish that SHFE 1609 aluminium will fall below RMB 12,400/mt and LME aluminium will drop below the 5-day moving average. First, technical side suggests downward corrections on the way for SHFE aluminium. Second, demand will weaken further in the off-season. Third, shipments from northwest China will recover with weather turning better. Aluminium stocks in domestic five major markets rose slightly on Monday compared with last Thursday.

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