LME aluminium gains but a drop is in the forecast; SHFE issues amendment to futures contracts

LME aluminium has cleared a support at US$1,916. The contract inched higher during Monday's night trading hours closing at US$1,908 per tonne, up 0.36 per cent from the previous close of US$1,901 per tonne. Reuters observes LME aluminium is now up for a fall to US$1,891 per tonne- the next support and an immediate target. As per Shanghai Metals Market forecast, the lightmetal will move in the range of US$1,910-1,930 per tonne on Tuesday, March 21, "hurt by other weak metals."

As on March 20, LME official cash buyer price of aluminium stands at US$1,907.50 per tonne, cash seller & settlement price is US$1,908 per tonne, 3M buyer price is US$1,923 per tonne, 3M seller price is US$1,924 per tonne, Dec1 buyer price is US$1,957 per tonne, and Dec1 seller price is US$1,962 per tonne. The current LME official Opening Stock of aluminium is estimated at 1985875 tonnes, total Live Warrants is 1211875 tonnes, and Cancelled Warrant is 774000 tonnes.

As on March 17, LME Aluminium US Premium remains unchanged at US$215, LME Aluminium West-Europe Premium stands at US$95, LME Aluminium East-Asia Premium is US$100 and LME Aluminium South-East Asia Premium is US$15 (per tonne).

The benchmark price of aluminium on Shanghai Metal Exchange (SME) has dropped marginally lower at US$1,955 per tonne on March 21, Tuesday, from US$1,964 per tonne yesterday.

The Shanghai Futures Exchange (SHFE) has announced the issuance of the amendments to base metal futures contracts. The key amendment to aluminium futures contracts is to the removal of delivery restriction on the weight of aluminium ingot at 25KG by increasing the weight range to 15Kg±2Kg, 20Kg±2Kg or 25KG±2KG.

Earlier the transaction fee was required to be equal to or below 0.02 per cent of the transaction value (Risk reserve included)- that has been removed and changes have been made in the names of futures contract and appendix. The amendment will be made effective from March 27, 2017 onward.

"New domestic aluminium brands will be added to the deliverable list to SHFE’s registered warehouses this year after the amendment, with increment volumes in deliverable brands expected to exceed 5 million tonnes,” predicts an aluminium analyst at SMM.

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Coming to the aluminium price movement in aluminium, SHFE 1705 aluminium is predicted to move around the 5 and 10-day moving averages trading in the range of RMB 13,700-13,900 per tonne on Tuesday.

Spot aluminium in China's domestic market should trade at discounts of RMB 160-120 per tonne, says SMM.

Market participants are going to see a light economic data calendar on Tuesday. Crude oil prices are yet to gain strength due to extended production cuts in the U.S. which could also indicate at a potential near-term aluminium price decline.