Aluminum Smelters in China squeeze supply on the news of SHFE’s gain on Friday

Amidst uncertainties about aluminium capacity cut in China, The government has issued a suggestion that construction of new coal-fired captive power plants will be banned in cities like Beijing, Tianjin, Hebei, Yangtze River Delta and Pearl River Delta. The document also directed that coal-fired captive power plants must comply with national energy-saving and emission discharge standards. On this news, SHFE aluminium prices jumped to RMB 14,850/mt on Friday after opening at RMB 14,690/mt. SHFE 1710 aluminium plunged later, closing at RMB 14,765/mt. 

On this development, aluminium smelters in east China are holding back goods as recent gains in SHFE aluminium market have fuelled their optimism. Market supply was squeezed as a result, which forced downstream producers to accept higher prices for the metal. 

As of August 4, mainstream traded prices were 14,450-14,460 yuan/tonne in Shanghai, 14,450-14,460 yuan/tonne in Wuxi, and 14,480-14,500 yuan/tonne in Hangzhou.  

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In another update from SMM, it is learned that aluminium billet stocks in Guangdong have been growing steadily due to off-season low order from the downstream producers. As of August 3, aluminium billet stocks in Guangdong stood at 98,400 tonnes, up 8,800 tonnes on a weekly basis. So, one capacity cut or supply tightness in one region is being compensated by growing stocks in another market keeping the market prices in check.