Aluminium touches six-months high in China as metals rise

Aluminium increased for a third day to the highest level in six months as metals advanced in Shanghai after a report that industrial profits increased in China, ending a seven-month losing streak. The London Metal Exchange was closed for a public holiday.

The metal used in everything from beverage cans to window frames added as much as 1.1 per cent to 11,830 yuan ($1,818) a metric ton, the highest since September 25, before trading at 11,810 by 11:29 a.m. local time. Futures in Shanghai have rallied about 22 per cent from their record low on November 24 as China’s biggest smelters vowed to curb capacity and output fell 7.7 per cent from a year earlier in the first two months of 2016.

Other non-ferrous metals declined last week, as commodities were hurt by a stronger dollar. Industrial companies’ profits climbed 4.8 per cent from a year earlier to 780.7 billion yuan in January-February, the National Bureau of Statistics said in a statement Sunday.

Will the rising momentum continue?

Tightening supply in China remains the major driver, as reflected by over 60,000 tonne decline in aluminium stocks in major markets. The supply side will continue favoring prices of the light metal. SHFE 1605 aluminium, the most active one, is poised to head for 12,000 yuan per tonne, SMM predicts.

LME aluminium, on the other hand, will find technical support and the strategy of buying LME aluminium while selling SHFE aluminium for arbitrage will also put a floor. SMM sees LME aluminium at $1,470-1,500 per tonne.

Destocking in Chinese aluminium market will help spot discounts stabilize at 30-60 yuan per tonne.