LME aluminium hits five-week highs as supply worries escalate in China

LME aluminium surged 1.6 per cent on Thursday, July 6, to climb to more than five-week highs at US$1,944 per tonne- the highest since May 30, as worries about supply from the top producer China escalated. The light metal later retreated to US$1,925.50 per tonne, still up by 0.65 per cent from its previous close of US$1,913 per tonne on Wednesday, July 5. The confidence was back in the market after investors started refocussing on robust metal supply elsewhere.

"We are concerned that the buy-side may be too optimistic on the prospects for aluminium and alumina markets to tighten from winter-output restrictions in China from the fourth quarter," noted UBS. "We think the shuts will be enforced but there is capacity elsewhere & inventory to buffer the impact," it said.

Technical suggest that the upside in LME aluminium faces resistance around US$1,970 with strong support at US$1,910. Shanghai Metals Market forecasts that LME aluminium will range at US$1,932-1,950 per tonne on Friday, July 7 due to weak US dollar.

As on July 6, LME official cash buyer aluminium price stands at US$1,925 per tonne, cash seller & settlement aluminium price is US$1,925.50 per tonne, 3M buyer price is US$1,935 per tonne, 3M seller price is US$1,935.50 per tonne, Dec1 buyer price is US$1,968 per tonne, and Dec1 seller price is US$1,973 per tonne. The current LME official Opening Stock of aluminium is estimated at 1391525 tonnes, total Live Warrant is 1068050 tonnes, and Cancelled Warrant is 323475 tonnes.

LME aluminium premiums remain unchanged across major markets worldwide. As on July 5, LME aluminium premium for the US stands at US$180, LME Aluminium West-Europe Premium stands at US$80, LME Aluminium East-Asia Premium is US$105, and LME Aluminium South-East Asia Premium is US$15 (per tonne).

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The benchmark aluminium price at Shanghai Metal Exchange (SME) stands at US$2,044 per tonne, down from yesterday’s benchmark price of US$2,054 per tonne.

At Shanghai Futures Exchange (SHFE), the most active aluminium future contract SHFE 1709 aluminium opened at RMB 14,270 per tonne on Thursday, July 6, and then plunged to RMB 14,170 per tonne. Later, the contract rebounded to close RMB 14,210 per tonne. SMM predicts that SHFE 1709 aluminium will move at RMB 14,150-14,300 per tonne on Friday, July 7.

Spot aluminium in east China market is expected to trade at discounts of RMB 140-100 per tonne over SHFE 1707 aluminium contract on Friday.

China Aluminum International Trading Co. (Chalco Trading) cut aluminium prices it offered in major markets today. The revised prices are as follows:

Unit: RMB per tonne

The market focus will be on the US non-farm payrolls, jobless rate, labour participation rate and average hourly wage growth on Friday, SMM said.