About 33% of Chinese aluminum smelters bullish over prices this week

About 33 per cent of the 33 Chinese aluminium smelters surveyed by SMM expect aluminium prices to rise this week.

Those optimists see SHFE 1605 aluminium rising above RMB 11,500/mt and LME aluminium breaking through USD 1,600/mt, citing positive factors. First, the PBOC’s RRR cuts stimulated home sales in first-tier cities, and home prices in second-tier cities followed up. This will brighten demand outlook for aluminium windows and doors, etc. Second, alumina prices have risen from RMB 1,661/mt at the end of last year to current RMB 1,855/mt and on track for more gains, adding to aluminium costs. Third, aluminium stocks in China’s three major markets were flat with a week ago as consumption recovers. Fourth, technical side is positive for SHFE aluminium.

Another 56 per cent see SHFE 1605 aluminium stabilizing at RMB 11,300-11,500/mt and LME aluminium stabilizing at USD 1,570-1,590/mt. The game between longs and shorts will be intense at RMB 11,500/mt for SHFE aluminium, and prices will face selling pressure from those open positions for hedging purpose. KDJ indicator suggests there is little upside space for SHFE aluminium. SHFE aluminium has found support at moving averages and some investors may choose to enter around the 5-day moving average. Positions of SHFE 1606 aluminium contracts have increased markedly recently, signs of capital flows from SHFE 1605 to 1606 contract.

The rest 11 per cent fear that SHFE 1605 aluminium will fall below RMB 11,300/mt and LME aluminium will fall below USD 1,570/mt, citing several negative factors. First, China’s manufacturing PMI was negative in February and this year’s GDP target has been cut to 6.5 per cent-7.0 per cent. Chinese economy is facing downward pressure from restructuring. Second, aluminium processors in south China reopened later than usual after this year’s Chinese New Year holiday. Consumption recovery was weaker than in years past.