68% Chinese aluminium smelters see aluminium prices stabilize this week, SMM survey

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

About 68% of them expect SHFE 1610 aluminium to stabilize between RMB 12,100-12,400/mt and LME aluminium between USD 1,625-1,650/mt. Aluminium stocks in domestic five major markets stopped falling on Monday, up 8,000 mt from last Thursday. China Monetary Policy Report Q2 2016, released by the PBOC on August 5, weakened hopes for interest rate and RRR cuts. If SHFE aluminium keeps rising, prices will face short selling from aluminium smelters for hedging purpose. Despite positive non-farm payrolls, the US dollar index lost upward momentum after breaking through the 40-day moving average, which will give some relief to base metals prices.

Another 25% expect SHFE 1610 aluminium to rise above RMB 12,500/mt and LME aluminium to hold firm at above USD 1,650/mt. SHFE 1610 aluminium has met no resistance from moving averages, and market is dominated by longs. SHFE aluminium warehouse warrants fell to less than 9,000 mt on Monday. Spot premiums in domestic market remain high at RMB 130/mt over SHFE 1608 aluminium. Supply in Shanghai is tighter than in Wuxi and Hangzhou. Tight supply will allow suppliers to hold offers firm.

The rest 7% are bearish that SHFE 1610 aluminium will fall below RMB 12,100/mt and LME aluminium will drop below USD 1,625/mt. Orders at aluminium processors have fallen this month from last month, which will reduce aluminium demand. Aluminium smelters are cutting ratio of aluminium liquid output and increasing output of aluminium ingot . When combined with release from new and restarted capacity, aluminium supply will grow. More aluminium ingots will arrive at major consumption hubs as shipments recover. Spot premiums will narrow with narrowing price spread between SHFE 1608 and 1609 aluminium, which will act as a drag on SHFE aluminium.