About half of Chinese aluminium smelters see aluminium prices rise this week

About half of the 48 Chinese aluminium smelters surveyed by SMM expect aluminium prices to rise this week.

Those optimists see SHFE 1606 aluminium rising to RMB 11,900-12,000/mt and LME aluminium advancing above USD 1,525/mt. China’s PPI rose 0.5 per cent MoM in March, the first month-on-month rise since January 2014. A series of other Chinese economic data to be released later this week will be positive as well. Long buying was reported after last week’s technical correction. aluminium stocks in China’s five major markets fell 28,000 mt on a weekly basis last Thursday, will head for 400,000-500,000 mt, another positive factor for aluminium prices.

Another 42 per cent see SHFE 1606 aluminium stabilizing at RMB 11,650-11,850/mt and LME aluminium stabilizing at USD 1,500-1,525/mt. SHFE 1606 aluminium has met strong resistance at RMB 11,850/mt. Optimism over incoming Chinese economic data will offer support to aluminium prices. Downstream producers are discouraged by higher aluminium prices, while suppliers are unwilling to sell at lower prices. Alumina prices have been stable for two consecutive weeks. Some alumina producers are beginning to resume production or halt production cuts, which will leave little room for alumina prices to rise, in turn giving no upward momentum to aluminium prices.

Only 8 per cent are bearish that SHFE 1606 aluminium will fall below the 20-day moving average and LME aluminium will retreat from USD 1,505/mt. Opening of short positions by smelters for hedging purpose will put downward pressure on prices. Aluminium capacity restarts, though unlikely to contribute a lot to output H1, will give shorts reason to enter the market.