LME and SHFE aluminium continue the downward trend started last week; the trend is likely to continue in the short term

The US dollar fell on Friday as slower US employment growth in July and escalated US-China trade tensions fuelled expectations that the Federal Reserve would cut interest rates again in September. LME base metals closed lower on Friday. LME aluminium shed 0.2% and SHFE aluminium edged down 0.04%.

Three-month LME aluminium erased earlier gains to a six-week low of US$1,770 per tonne on Friday night before it closed 0.23% lower at US$1,773 per tonne. London aluminium longs are expected to remain cautious in the short run. We expect the LME aluminium contracts to trade lower today.

As on August 2, Friday, LME aluminium cash (bid) price stood at US$ 1748.50 per tonne, LME official settlement price stands at US$ 1749 per tonne; 3-months bid price stands at US$ 1776.50 per tonne, 3-months offer price is US$ 1777.50 per tonne; Dec 20 bid price stands at US$ 1878 per tonne, and Dec 20 offer price stands at US$ 1883 per tonne.

The LME aluminium opening stock increased yesterday to 1024200 tonnes. Live Warrants totalled at 774675 tonnes, and Cancelled Warrants were 249525 tonnes.

LME aluminium 3-months Asian Reference Price is hovering at US$ 1781 per tonne.

SME and SHFE Aluminium Price Trend

The benchmark aluminium price on Shanghai Metal Exchange (SME) dropped to US$ 1978 per tonne today from US$ 1998 per tonne on Friday.

As the US dollar remained robust, the most liquid SHFE September contract shed 0.47% on the day to end at RMB13,795 per tonne on Friday. The SHFE September contract recovered from a lower open on Friday night to close a tad lower at RMB 13,800 per tonne. New capacity at Mengtai and Guizhou Denggao and higher ingot supplies from the north-west, where producers turn more molten aluminium into ingots, will weigh on aluminium prices. SHFE aluminium is expected to remain rangebound in the short term, and to move between RMB 13,800-13,900 per tonne today. Spot prices are seen at a discount of RMB 20 per tonne to a premium of RMB 20 per tonne.