Both LME and SHFE aluminium traded low over the week on weak fundamentals; no significant gain likely next week

The US dollar traded robustly last week. After a slight fall in the mid-week dollar recovered but remained under 97 as concerns before the G20 meeting prompted investors to buy back the currency.

LME aluminium continued to trade weakly over the weak but recovered some losses towards the end of the week. The contract saw a trading range of US$1912.50-1,935 per tonne, lower than the last week.  The LME aluminium contract started the week at US$1920 per tonne and continued its downward trend with the US dollar holding steady against a currency basket and in absence of strong market fundamentals. The contract plunged to US$1912.50 per tonne mid-week and regained slowly at the end of the week when the dollar consolidated and in anticipation of a resolving of the U.S. China trade war during G20 summit. At the G20 summit in Buenos Aires on Friday and Saturday, the US President Donald Trump and China President Xi Jinping are scheduled to discuss trade issues after months of tension between the world's two biggest economies. 

LME aluminium contract failed to stand firm above the 10-day moving average with resistance at the 20-day moving average. The contract is likely to trade at US$1,920-1,940 per tonne in the coming week. Results of the G20 summit might have a bearing on the price movement next week.

As on November 30, Friday, LME aluminium cash (bid) price stood at US$ 1934.50per tonne, LME official settlement price stands at US$ 1935 per tonne; 3-months bid price stands at US$ 1937.50 per tonne, 3-months offer price is US$ 1938.50 per tonne; Dec 19 bid price stands at US$ 2005 per tonne, and Dec 19 offer price stands at US$ 2010per tonne.  

The LME aluminium opening stock dropped to 1052450 tonnes. Live Warrants totalled at 795275 tonnes, and Cancelled Warrants were 257175 tonnes.

LME aluminium 3-months Asian Reference Price is hovering at US$ 1935 per tonne.

SME and SHFE Aluminium Price Trend

The benchmark aluminium price on Shanghai Metal Exchange followed a downward pattern over the week. The contract started the week at US$ 1980 per tonne and wrapped up the week’s trading at US$ 1946 per tonne. 

Chinese aluminium prices fell to their lowest in more than two years on Friday and clocked a third successive monthly decline, as stalling manufacturing growth compounded plentiful supply amid relatively lenient winter output curbs.

Shanghai aluminium shed 2.8 per cent over November, leaving smelters in China struggling to turn a profit and leading some to cut output even without being ordered to do so on environmental grounds.

Weak fundamentals weighed the SHFE 1901 contract below the daily moving average and the contract dipped further to close at RMB 13,645 per tonne.  Without positive news on the fundamentals front, aluminium prices remained weak and the contract is unlikely to rebound substantially.We see no significant upward room for LME and SHFE aluminium next week. The contracts will continue to trade lower under strong US dollar and low downstream consumption.