Falling inventories lift LME aluminium; China base metals to keep diverging, says SMM

The rising momentum in LME aluminium is continuing. The light metal which crossed the US$1,900 per tonne mark on Friday last week again rose on Tuesday's night trading to close at US$1,918 per tonne, up 0.52 per cent from its previous day's close of US$1,908 per tonne. Reuters observes LME aluminium is neutral in a range of US$1,916-$1,937 per tonne, and an escape could suggest a direction. As per Shanghai Metals Market (SMM) forecast, the contract will move at US$1,915-1,950 per tonne on Wednesday, March 22.

As on March 21, LME official cash buyer price of aluminium stands at US$1,916 per tonne, cash seller & settlement price is US$1,918 per tonne, 3M buyer price is US$1,929.50 per tonne, 3M seller price is US$1,930 per tonne, Dec1 buyer price is US$1,963 per tonne, and Dec1 seller price is US$1,968 per tonne. The current LME official Opening Stock of aluminium is estimated at 1975050 tonnes, total Live Warrants is 1146700 tonnes, and Cancelled Warrant is 828350 tonnes.

As on March 20, 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 risen in tandem with LME aluminium. Rising by 0.40 per cent from US$1,955 per tonne, the price now stands at US$1,963 per tonne.

Aluminium traded on Shanghai Futures Exchange (SHFE) was seen diverging from the global aluminium price trend initially. SHFE 1705 aluminium after opening at RMB 13,790 per tonne declined to RMB 13,700 tonne on Tuesday affected by rumours that the government will publish aluminium smelting capacities, which were constructed without approval. The contract finally closed at RMB 13,880 per tonne. SMM predicts SHFE 1705 aluminium will hover in the range of RMB 13,75-13,950 per tonne on Wednesday.

Spot aluminium in China's domestic market should trade at discounts of RMB 200-160 per tonne on Wednesday, forecasts SMM.

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The correlation between the U.S. dollar and commodity price trend is currently seen as weakening. On Wednesday, the market focus is expected to be on the U.S. oil inventory data and existing home sales data of February. Base metals will keep diverging in the near term, predicts SMM.