52% of Chinese aluminium smelters bearish toward aluminium prices, SMM survey

52% of the 27 Chinese aluminium smelters surveyed by SMM are bearish toward this week’s aluminium prices. Another 41% expect prices to stabilize, while the rest 7% see a rally.

Those pessimists see LME aluminium falling below USD 1,440/mt and SHFE 1602 aluminium down below RMB 9,800/mt. They see poor market fundamentals in China as the major negative factor. Scale of production cuts in China is too small to reverse supply glut. Stocks in trading markets remain high. Processors are running at low capacity and buying only to need. Spot discounts in China remain high at above RMB 100/mt, acting as constrain on SHFE aluminium . Technically, SHFE aluminium has met strong resistance at moving averages. Negative technical side and a firm dollar on high hopes for rate hike will send LME aluminium down.

Those neutralists see LME aluminium at USD 1,440-1,460/mt and SHFE 1602 aluminium at RMB 9,800-9,950/mt. Total positions of all SHFE aluminium contract fell sharply on Monday, due mainly to exit of shorts following rumors of production cuts in China. Profit-taking by shorts allowed SHFE aluminium to rally slightly. But prices lack momentum to rise further due to selling pressure at highs.

The rest expect LME aluminium to return above USD 1,460/mt and SHFE 1602 aluminium rise above RMB 9,950/mt. Aluminium prices are already quite low, leaving little room for more speculative activity. So, more shorts are exported to turn to other base metals. News on production cuts in China will also support aluminium prices.