US dollar rose to a more than two-year high to depress LME aluminium further yesterday; SHFE remains strong

The US dollar continued to rise to a more than two-year high of 99.13 on expectations of an upcoming interest rate cut by the Federal Reserve. LME base metals mostly dipped while SHFE metals closed higher for the most part. LME aluminium lost 0.46% and SHFE aluminium grew 0.11%.

Three-month LME aluminium hovered within a wide range and fell below all moving averages to a low of US$1,742.5 per tonne as the US dollar strengthened. It pared some losses and finished at US$1,749 per tonne, down 0.46% on the day.  LME aluminium is likely to trade at US$1,740-1,780 per tonne today.

As on September 2, Monday, LME aluminium cash (bid) price stood at US$ 1716 per tonne, LME official settlement price stands at US$ 1716.50 per tonne; 3-months bid price stands at US$ 1745 per tonne, 3-months offer price is US$ 1745.50 per tonne; Dec 20 bid price stands at US$ 1828 per tonne, and Dec 20 offer price stands at US$ 1833 per tonne.

The LME aluminium opening stock dropped to 919050 tonnes. Live Warrants totalled at 677725 tonnes, and Cancelled Warrants were 241325 tonnes.

LME aluminium 3-months Asian Reference Price is hovering at US$ 1752 per tonne.

The buildup of long positions lifted the most traded SHFE 1910 contract above the five- and 10-day moving averages to a one-week high of RMB 14,365 per tonne, before the contract ended 0.74% higher at RMB 14,355 per tonne. The October contract relinquished gains from the daytime and struggled around the five- and 10- day moving averages. Expectations of higher supply drove longs to depart despite a decline in primary inventories over the weekend. Today, the contract is seen trading between RMB 14,200-14,350 per tonne.

SMM data showed that social inventories of primary aluminium ingots in China continued to decline over the weekend. This, together with an anticipated demand pick-up in September, will likely remain supportive of SHFE aluminium in the near term, but upside potential will be hampered by the recovery of primary aluminium capacity that will exacerbate supply pressure after October.

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