LME aluminium drops as market digests China output cut news

LME aluminium after registering the biggest one-day increase in last three months dropped 0.36 per cent on Friday, July 14. The light metal closed at US$1,904 per tonne on the last trading day of the week, down from US$1,911 per tonne on Thursday, July 13. The market continued to digest the news on output cut in China domestic market thereby leading to the aluminium price drop. Shanghai Metals Market thinks that opening of new capacity and restarting of old capacity, combined with weakening consumption, will further cap the gains in aluminium price.

As per Reuters’ technical analysis, LME aluminium may break a major resistance at US$1,939 per tonne and advance further to US$1,953-1,962 range. The lower support, on the other hand, is at US$1,917; a break below this level could cause a loss to US$1,895 per tonne.  

As on July 13, LME official cash buyer aluminium price (Bid Price) stands at US$1,902 per tonne, cash seller & settlement aluminium price (Offer price) is US$1,904 per tonne, 3M Bid Price is US$1,920.50 per tonne, 3M Offer Price is US$1,921 per tonne, Dec1 Bid Price is US$1,953 per tonne, and Dec1 Offer Price is US$1,958 per tonne. The current LME official Opening Stock of aluminium is estimated at 1382225 tonnes, total Live Warrant is 1063425 tonnes, and Cancelled Warrant is 318800 tonnes.

LME aluminium premiums remain unchanged across major markets worldwide. As on July 14, LME aluminium premium for the US stands at US$180, LME Aluminium West-Europe Premium stands at US$80, and LME Aluminium South-East Asia Premium is US$15 (per tonne).  

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The benchmark aluminium price at Shanghai Metal Exchange (SME) has risen higher at US$2,099 per tonne on Monday, July 17, up 0.33 per cent from Friday’s benchmark price of US$2,092 per tonne.

At Shanghai Futures Exchange (SHFE), the most active aluminium future contract SHFE 1709 aluminium opened at RMB 14,425 per tonne on Friday, July 14, and then rose on the news of Shandong cutting capacity by 2 million tonnes. Later the contract fluctuated before ending down at RMB 14,375 per tonne. SMM predicts that SHFE 1709 aluminium will range between RMB 14,300-14,450 per tonne on Monday, July 17.

Spot aluminium in China domestic market is expected to trade at discounts of RMB 100-150 per tonne over SHFE 1708 aluminium on Monday.

The market focus will be on China’s Q2 GDP and New York Fed’s manufacturing index for July on Monday, SMM said.