45% Chinese aluminium smelters bearish toward aluminium prices this week

SMM surveyed 44 Chinese aluminium smelters about their opinions over aluminium price outlook.

About 45 per cent of them expect SHFE 1608 aluminium to fall below RMB 11,800/mt and LME aluminium below USD 1,560/mt. First, the price spread between SHFE 1606 and 1607 aluminium contracts is as big as RMB 200/mt before upcoming delivery of the former. This left suppliers eager to sell, but trading was poor, especially in south China, where trading was contributed mainly by traders. Second, downstream producers mostly watched from the sidelines, with low buying interest, due to falling orders. Third, aluminium stocks in China’s five major markets grew nearly 20,000 mt as of June 13 compared with June 8. Ongoing capacity restarts will likely allow stocks to continue growing. Fourth, growing supply in spot market after delivery of SHFE 1606 aluminium will make high spot premiums unsustainable.

Another 37 per cent expect SHFE 1608 aluminium to stabilize at RMB 11,800-12,000/mt and LME aluminium hold stable at USD 1,560-1,580/mt. First, although poor non-farm payrolls will leave low possibility of rate hike in June, risks of UK exit from the EU will favor the US dollar. Second, SHFE 1608 aluminium has fallen below RMB 12,000/mt, which likely slow down pace of capacity restarts and delay commissioning of new capacity. Third, total positions of all SHFE aluminium contracts were down 14,658 lots on Monday due to exit of shorts. SHFE 1608 aluminium has stood above the 5-day moving average, with low possibility of short selling.

The rest 18 per cent are bullish that SHFE 1608 aluminium will return above RMB 12,000/mt and LME aluminium will hold at above USD 1,570/mt. First, strong zinc, lead and nickel prices will offer support to aluminium. Second, recent meeting by six major Chinese aluminium smelters will likely come up with measures to support aluminium prices.