About 67% Chinese aluminium smelters expect aluminium prices to rise this week

SMM surveyed 36 Chinese aluminium smelters about their opinions over aluminium price outlook.

Those optimists see SHFE 1607 aluminium breaking through the 10-day moving average and LME aluminium rising above USD 1,550/mt. First, aluminium capacity restarts in China are limited. China’s aluminium output fell 2 per cent YoY to 2.49 million mt in April, also down from March. Second, operating rates rose at aluminium processors, especially wire & cable producers, and will remain high in May. Third, aluminium stocks in China five major markets fell at 40,000-50,000 mt pace each week after a brief slowdown in the first week of May, and are now below 600,000 mt. Fourth, speculative capital has flowed out of SHFE aluminium market, meaning price movement will depend mainly on market fundamentals. Fifth, crude oil hit new high of USD 47.92/bbl and will head for USD 50/bbl.

Another 27 per cent SHFE 1607 aluminium will stabilize at RMB 12,000-12,250/mt and LME aluminium at USD 1,530-1,550/mt. First, aluminium smelters will open short positions at high price levels for hedging purpose. Second, SHFE 1607 aluminium will find support at the 5-day moving average. Third, the price spread between SHFE 1605 and 1606 aluminium contracts was RMB 95/mt. Spot prices will fall after delivery of SHFE 1605 aluminium. Goods under warrants will be released into the market after delivery of SHFE 1605 aluminium, which will keep SHFE aluminium in check.

The rest 6 per cent are bearish that SHFE 1607 aluminium will fall below RMB 12,000/mt and LME aluminium will fall below USD 1,530/mt. First, Chinese economic data for April were poor, including industrial value-added, consumer goods retail sales, and urban fixed asset investment. Second, rising SHFE/LME aluminium price ratio be unfavorable for aluminium semis exports and open window for aluminium imports. Third, the US dollar will strengthen from the US Fed’s hawkish tone.