LME aluminium is on downward track driven by fading expectations on supply tightness in China

The market's expectations of supply tightness of aluminium due to the capacity cut in China is slowly fading away  as the winter production cuts have been less than expected and the Chinese aluminium output kept on increasing over the period.

That led LME aluminium prices to correct over November coming down to a level of USD 2,030 to USD 2,060 per tonne currently. Despite the all-time-low LME inventories, the prices continue to move downward. LME prices have also been hit by lower aluminium prices in the domestic Chinese market due to increasing supply. According to the National Bureau of Statistics of China, Shanxi Province in Northwest China produced 820,000 tonnes of refined aluminium in January-October, up 19.6% year on year. 

The LME cash contract closed further down from US$2,052 per tonne on November 5 to US$2,028.5 per tonne on November 6.  However, in the medium term LME prices are not expected to plunge below USD2000 per tonne.

As on December 5, LME official cash buyer aluminium price (Bid Price) stands at US$2,028 per tonne, cash seller & settlement aluminium price (Offer price) is US$2,028.50 per tonne, 3M Bid Price is US$2,042.50 per tonne, 3M Offer Price is US$2,043 per tonne, Dec1 Bid Price is US$2,090 per tonne, and Dec1 Offer Price is US$2,095 per tonne. LME aluminium Opening Stock or the LME aluminium inventory level stands at 1098550 tonnes, total Live Warrants is 864100 tonnes, and Cancelled Warrant is 234450 tonnes.

The most active Al1812 contract on the Shanghai Futures Exchange closed at Yuan 14,470/t on Wednesday November 6, down RMB 295 day on day. According to Platts, rising SHFE stocks is one of the primary reasons for the aluminium pricedecline in China. Deliverable aluminum stocks stood at 702,321 mt in SHFE warehouses Friday, up 1.1% week on week.