China aluminium prices on six years high today on the back of on-going capacity cut

Aluminium prices in China registers a significant leap today after falling consecutively for two days. The price of aluminium closes on a six-year high today on speculation that the latest limits on expanding output capacity will help curtail oversupply. The aluminium price per tonne on the Shanghai Futures Exchange rose as much as 3.2 per cent on Thursday to RMB16,650/t.

SHFE 1710 aluminium fell to RMB 16,090/mt due to exit of longs after opening at RMB 16,285/mt on Wednesday. However, the contract recovered losses during night trading and expected to challenge new highs between RMB 16,550-16,850/t today. In domestic spot market in East China, spot discounts are expected to expand to RMB 220-18/t.

The stock in China is however growing notwithstanding the rising prices.  In response to surging aluminium stocks in Wuxi, one local large state-owned company has put its backup warehouse into use in order to balance load-in and load-out shipments of the warehouse and make stocks stable.

In another update, Inner Mongolia Chuangyuan Metal Co. has obtained aluminium capacity swap quota of 207,000 tonnes from Henan Province. The company has also announced its plan to build 800,000 tonnes of aluminium capacity that will come into operations at the end of 2018. 

JP Morgan expects China aluminium prices to gain about $100 per tonne in the fourth quarter, noting they “have been well supported by collective realization that supply reform is a reality, despite Chinese aluminium inventories more than quadrupling so far this year.”