LME aluminium price rally cools down but SMM says it's 'normal'

LME aluminium is on an upward trajectory. Marginal decline in China's aluminium exports this year coupled with steep rise in thermal coal and alumina prices have buoyed the prices up on the bourse, so much so that even the most pessimistic estimates put the annual demand growth rate of the metal at about 4 per cent. LME aluminium closed at US$1,739/mt after Tuesday's night trading. The current cash buyer price as on November 23 stands at US$1,738/mt.

Three-Month LME aluminium prices are trending higher this year. The 3-months LME Buyer price is recorded at US$1,36.5/mt and 3-months LME Seller price is at US$1,737/mt.

LME official opening stocks of aluminium as on November 23 stands at 2144100 tonnes.

In China, aluminium on Shanghai Metal Exchange was traded at US$2,164/mt on Tuesday and opened at US$2,174/mt on Wednesday, up 0.45 per cent from the previous close.

Base metal prices on the Shanghai Futures Exchange are expected to keep advancing on Wednesday, SMM predicts.

“Rising momentum remains in the commodity market, despite new regulations again by the bourse, and eyes should be also on data results, including US oil inventory data,” SMM says.

SHFE announced yesterday that it would raise margin and trading limit on aluminium along with other futures contracts. Margins and daily movement limits will be lifted to 9 per cent from the previous 8 per cent,effective November 24.

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The aluminium price rally on LME has somewhat cooled down in the last few days as the price rise has been marginal. But SMM says the price correction is 'normal within the context of a bull market.' Given the bullish price action and the shift in fundamentals, analysts would expect aluminum prices to quickly rebound and trend higher. SMM thinks aluminum buyers should take cue from the recent price movements and protect themselves against “unexpected” upside moves to minimize their risk.