38% of Chinese smelters bearish toward aluminium prices this week, SMM survey

38% of the 42 Chinese aluminium smelters surveyed by SMM are bearish toward this week’s aluminium prices .

Those pessimists fear that LME aluminium will fall below USD 1,500/mt and that SHFE 1603 aluminium will drop below RMB 10,500/mt. They argued that on-grid power tariffs cuts by the Chinese government and power tariff subsidy by local governments will weaken cost for aluminum prices. Besides, shorts are gathering momentum recently, and longs are cautious about entering, another negative factor.

Another 19% are optimistic that LME aluminium will rise above USD 1,530/mt and SHFE 1603 aluminium will climb above RMB 1,700/mt. They noted that aluminium stocks in China’s five major trading markets have been falling for six weeks in a row due to production cuts. Large aluminium processors will replenish stocks after their stocks dropped. Some processors will report an improvement in export orders. Spot discounts in China reversed from RMB 100/mt to a small premium, due to tight supply. Continued production cuts and slowing commissioning of new aluminium capacity will push aluminum prices up further.

The rest 43% see SHFE 1603 aluminium moving around RMB 10,500/mt. They understand that longs and shorts will be cautious out of risk aversion ahead of the New Year holiday. Aluminium price movement will be subject mainly to market fundamentals.