About 41% of Chinese aluminium smelters bullish over prices this week

About 41 per cent of the 34 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 advancing above all moving averages, citing positive factors. First, China’s aluminium output fell 5.8 per cent MoM in February. Aluminium stocks in Shanghai, Wuxi and Guangdong fell last Thursday from a week ago, with the decline three weeks earlier than in the same period last year. Second, spot prices will keep rising as delivery of SHFE 1603 aluminium is nearing, which will push SHFE aluminium up as well. Third, alumina prices rose for four weeks in a row and those in east China have risen to RMB 2,000/mt. Alumina capacity cuts in China have amounted to 4.4 million mt/yr so far this year, including capacity being cut. As such, there is still room for alumina prices to rise, offering cost support to aluminium prices. Fourth, crude oil prices have been performing well recently, also favoring base metals.

Another 41 per cent see SHFE 1605 aluminium stabilizing at RMB 11,300-11,500/mt and LME aluminium stabilizing at USD 1,545-1,580/mt. Technically, SHFE 1605 aluminium is meeting resistance at the 5-day and 10-day moving averages and will face short selling pressure at RMB 11,500/mt mark, but will find support at the 20-day moving average, where longs will enter.

The rest 18 per cent are worried that SHFE 1605 aluminium will fall below RMB 11,300/mt and LME aluminium will fall below the 20-day moving average. LME aluminium failed in many attempts to break through USD 1,600/mt, reflecting a lack of market confidence. Moving averages of LME aluminium are pointing downward, indicating that prices will enter downward track. Market speculative activity will wane after China wraps up NPC & CPPCC on March 16.