Falling LME aluminium to find support at $1,650/mt but 44% Chinese smelters are still bearish

Aluminium contracs traded on London Metal Exhange (LME) will stop falling and find resistance at the 20-day and 40-day moving averages, with prices expected to range between USD1,650-1,670/mt today (August 23), observed analysts at Shanghai Metals Market (SMM). 
 
According to the market sources, most of the longs that entered last Thursday have exited, and both longs and shorts will be cautious in the short term. This will keep SHFE 1610 aluminium in check at RMB 12,320-12,460/mt. 

In east China’s spot aluminium market, spot premiums of RMB 50-90/mt are expected over SHFE 1609 aluminium contract, noted SMM.

SMM surveyed 44 Chinese aluminium smelters about their opinions over aluminium price outlook. About half of them expect SHFE 1610 aluminium to fall below RMB 12,300/mt and LME aluminium below USD 1,630/mt, citing many negative factors. SMM data showed China’s aluminium output totaled 2.68 million mt in July, up 106,000 mt MoM, and output in August is expected to rise 13,000 mt MoM.    

Another 45 per cent expect SHFE 1610 aluminium to stabilize between RMB 12,300-12,450/mt and LME aluminium between USD 1,630-1,665/mt; while the rest five per cent expect SHFE 1610 aluminium to rise above RMB 12,450/mt and LME aluminium above USD 1,665/mt.

Analysts are of the opinion that the rising coal and alumina prices will push up aluminium costs, which will likely trigger market speculation by longs. Producers of aluminium extrusions and other downstream products reported growing orders, which will boost overall aluminium demand.

Macroeconomic price indicators

According to SMM forecast, market will eye preliminary August manufacturing PMIs from Germany, the euro zone and the US, as well as US July new home sales today.

Economy in the euro zone showed obvious signs of stabilizing recently, with inflation up. It is expected that manufacturing PMIs in Germany and the euro zone will perform well, which will boost August consumer confidence index in the euro zone. Meanwhile, home prices in the US remained high in July.

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