LME aluminium to fall further to $1,600/mt, SMM reviews

LME aluminum drifted lower after opening at USD 1,641/mt last Friday. It rallied to USD 1,643/mt at one point as weak US economic data softened the US dollar. However, it fell back later as the US dollar regained strength, and ended at USD 1,620/mt. Trading volumes were up 4,689 lots to 13,124 lots, and positions were down 619 to 879,000. Crude oil futures prices recorded its biggest single day decline since the 2008 financial crisis on July 31. OPEC expressed no intention of production cuts, and drilling activity in the US increased, causing crude oil to fall.

Last Friday night, SHFE 1510 aluminum contract moved below the 5-day moving average after opening at RMB 12,245/mt, and finished the night session at RMB 12,225/mt. Trading volumes were down 16,690 lots to 10,924 lots, and positions were up 2,136 to 142,000.

A stronger US dollar and falling crude oil prices should weigh LME aluminum down to USD 1,600-1,630/mt on Monday. The final reading of Caixin China manufacturing PMI for July, due for release today, might be negative. SHFE 1510 aluminum contract should move at RMB 12,180-12,220/mt on Monday. In China’s spot market, trading activity should pick up due to a let-up in liquidity crunch at the beginning of the month. Spot discounts of RMB 90-130/mt are expected over SHFE 1508 aluminum contract.