45% Chinese aluminum smelters see aluminum prices rise this week, SMM Survey

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

About 45% of them expect SHFE 1607 aluminum to break through RMB 12,350/mt and LME aluminum rise above USD 1,560/mt. First, new aluminum capacity is commissioned at a slow pace. Smelters with plans to resume production will put facility under maintenance in June. So, output contribution from new and restarted capacity will be limited in June. Second, aluminum stocks in China’s five major markets fell to near 457,000 mt last Thursday. Should stocks continue falling at 40,000 mt pace each week on average, as did in May, stocks will fall to around 300,000 mt at the end of June. Third, suppliers in spot market are holding offers firm due to tight supply, allowing spot premiums to expand to RMB 150/mt over SHFE 1606 aluminum. Premiums are expected to expand further to over RMB 200/mt. Fourth, investors might raise bullish bets on SHFE 1607 aluminum so as to create a short squeeze.

Another 37% expect SHFE 1607 aluminum to stabilize at RMB 12,150-12,350/mt and LME aluminum hold stable at USD 1,540-1,560/mt. First, smelters and investment firms are expected to open short positions SHFE aluminum , putting downward pressure on prices. Second, tight supply in spot market will trigger short covering on the SHFE aluminum market after prices fall to low levels. Third, positions of SHFE 1608 aluminum increased a lot, which ease price volatility on SHFE 1607 aluminum.

The 18% are bearish that SHFE 1607 aluminum will fall below the 10-day moving average and LME aluminum will fall below USD 1,530/mt. First, US Fed Chair Yellen’s hawkish speech will allow the US dollar index to rise above 96. Second, China’s May official manufacturing PMI, due for release on Wednesday, will likely fall from April to 50.0.