LME aluminium yet to find a direction; drops despite a weak dollar and rising crude prices

LME aluminium underperformed compared to other base metals on the last trading day of the week ending July 29. Unable to draw support from a weak US dollar and rising crude oil prices, the light metal fell by 1.61 per cent from its earlier close at US$1,923 per tonne July 27, to US$1,892 per tonne on Friday, July 28. It seems, the effect of the news on supply side reforms is slowly fading from the market; and that is reflected in aluminium prices reversing its uptrend on LME.

Reuters’ technical analysis suggests that LME aluminium may retest a support at US$1,909 per tonne. On the higher trend line, there is a ‘pullback’ at US$1,922 per tonne. A break above this level may lead to a gain to US41,938 per tonne.

According to Shanghai Metals Market forecast, LME aluminium should range at US$1,900-1,920 per tonne on Monday, July 31.

As on July 28, LME official cash buyer aluminium price (Bid Price) stands at US$1,891 per tonne, cash seller & settlement aluminium price (Offer price) is US$1,892 per tonne, 3M Bid Price is US$1,912.50 per tonne, 3M Offer Price is US$1,913 per tonne, Dec1 Bid Price is US$1,953 per tonne, and Dec1 Offer Price is US$1,958 per tonne. LME aluminium Opening Stock stands at 1361900 tonnes, total Live Warrants is 1055900 tonnes, and Cancelled Warrant is 306000 tonnes.

LME aluminium premiums remain unchanged across major regions globally. As on July 28, LME aluminium premium for the US stands at US$165, LME Aluminium West-Europe Premium stands at US$80, LME Aluminium East Asia Premium remains unchanged at US$15, and LME Aluminium South-East Asia Premium is US$15 (per tonne).  

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SME and SHFE Aluminium Price Trend

The benchmark aluminium price at Shanghai Metal Exchange (SME) has inched up from US$2,111 per tonne on Friday, July 28, to US$2,112 per tonne on Monday, July 31.

At Shanghai Futures Exchange (SHFE), the most active aluminium future contract SHFE 1709 aluminium opened at RMB 14,450 per tonne on Friday, July 28, and then rose to RMB 14,500 per tonne. Later, the contract dropped to RMB 14,300 per tonne before ending at RMB 14,380 per tonne. SMM predicts that SHFE 1709 aluminium will “correct down” to the range of RMB 14,230-14,400 per tonne on Monday, July 31, as the market is slowly digesting the effects of supply side reforms.  

Spot aluminium in east China market is expected to trade at discounts of RMB 170-130 per tonne over SHFE 1708 aluminium on Friday.

The market focus will be on July official manufacturing PMI of China, June unemployment data of the Eurozone, and July CPI and June pending home sales data of the U.S. on Monday, SMM said.