LME aluminium inches higher on capacity crackdown rumour in China

LME aluminium prices have finally gained some strength after falling for four days at a stretch. The light metal traded globally closed at US$1,916 per tonne on Wednesday, May 3, up 0.36 per cent from its previous close of US$1,909 per tonne on Tuesday, May 2. Shanghai Metals Market (SMM) analysis suggests LME aluminium should challenge the 20-day moving average and escalate to the US$1,915-1,940 per tonne range on Thursday, May 4, fuelled by rumour that environmental protection authority will crackdown on illegal aluminium capacity in Shandong, China.

Coming to a longer-term forecast, Macquarie has raised its 2017 average aluminium price forecast by eight per cent from US$1,769 per tonne to US$1,913 per tonne.

As on May 3, LME official cash buyer price of aluminium stands at US$1,915 per tonne, cash seller & settlement price is US$1,916 per tonne, 3M buyer price is US$1,922 per tonne, 3M seller price is US$1,922.50 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 1617100 tonnes, total Live Warrants is 973525 tonnes, and Cancelled Warrant is 643575 tonnes.

LME aluminium premiums, as on May 2, remain unchanged across major regions. LME Aluminium East-Asia Premium stands at US$110, LME Aluminium US Premium is US$215, LME Aluminium West-Europe Premium is US$95, and LME Aluminium South-East Asia Premium remains unchanged at US$15 (per tonne).

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The benchmark aluminium price at Shanghai Metal Exchange (SME) stands at US$1,999 per tonne on Thursday, May 4, marginally down by 0.14 per cent from Wednesday’s benchmark price of US$2,002 per tonne.

The Ministry of Industry and Information Technology, China announced that it will initiate a series of checks on illegal smelting capacity in Shandong region from July, which may result in aluminium output drop in October. SMM says the news will help SHFE 1706 aluminium contract traded on Shanghai Futures Exchange to challenge RMB 14,000 per tonne mark and rise to RMB 13,850-14,100 per tonne on Thursday, May 4.

Spot aluminium in China's domestic market is projected to trade at discounts of RMB 90-50 per tonne over SHFE 1705 aluminium on Wednesday, May 3.

The market is likely to digest the US Fed’s policy decision and a series of other key US economic data, including March durable goods orders on Thursday, SMM observes.