China aluminum prices rise on falling inventories, with gains expected continuing, SMM

Aluminum prices are now gathering up the rising momentum due mainly to falling inventories, Shanghai Metals Market understands.

It is now the low-demand season, but aluminum stock declines have not slowed from those recorded during the peak-demand period.

Last Thursday, total inventories in Shanghai, Wuxi, Hangzhou, and Nanhai were 798,000 tonnes, down 42,000 tonnes on a weekly basis, according to SMM data.

SMM attributes the decline mainly to the drop in market supply after production halts or suspension, in addition to growing consumption of aluminum liquid and the shipment to regions with new fabricating capacity, such as Shandong, Henan, Hebei, Hubei, etc.

Over 2 million-tonne aluminum capacity has been cut so far this year, with complete shutdowns reported in May and June. More than one third of idled capacity is scheduled to be brought back online, but full resumption at the 700,000-tonne capacities in idled lines is not expected until August at the earliest, SMM learns.

Part of this is due to the difficulty in securing sufficient funds to support large scale restarts, and many smelters continue to struggle in loss-making territory. Besides, tight liquidity is also slowing the commissioning of new capacity, SMM believes.

The SMM recent survey of 34 large aluminum smelters and traders in China reveals 71% of them are bullish towards the outlook, expecting spot aluminum prices in China to rise to 13,900-14,000 yuan ($2,254-2,270) per tonne this week. The growth both in trading volumes and positions in SHFE aluminum market and few arrivals in spot market explain their optimism, the survey shows.