LME, SHFE aluminium post gains as China stocks tighten and global aluminium market ends in deficit

Aluminium prices on major bourses across the world have staged a strong comeback after the last week's slump with LME aluminium closing at US$1,726/mt on Monday, November 21. Yesterday, the contract touched the 20-day moving average and is expected to challenge the 10-day moving average on Tuesday. LME aluminium will range between US$1,710-1,730/mt today, supported by rising crude oil, says Shanghai Metals Market.

According to the latest Metals Balances Report published by the World Bureau of Metal Statistics (WBMS), the global primary aluminium market recorded a marginal deficit during the first nine months of the current year. The data revealed a deficit of 806,000 tons against a 550,000 tons deficit for the entire financial year of 2015.

Global production of aluminium declined marginally by 1.30 per cent during January-September period in 2016. China, with an estimated production of 23,439 kt, accounted for over 55 per cent of the world's total production. The output in EU-28 and NAFTA regions also fell by 0.5 per cent and 9.6 per cent year-on-year respectively. The primary aluminium production for the month of September stood at 4,880.1 kt, whereas the consumption totalled at 4,900.10 kt.

The global aluminium demand shrunk by 238,000 tonnes year-on-year during January to September period of the current financial to total at 43.48 million tonnes.


In China, aluminium traded on Shanghai Metal Exchange inched higher to close at US$2,101/mt on Monday and opened further higher at US$2,164/mt on Tuesday, November 22.

The contract traded on Shanghai Futures Exchange, SHFE 1701 aluminium, closed at 14,090 yuan/tonne as of November 21, up 4.02 per cent from the previous day. SHFE 1701 is expected to move between RMB 14,000-14,250/mt on Tuesday.

“The commodity market overnight, including base metals, rallied across the board, and market sentiment remains positive, and technical corrections will be likely for some products,” SMM says.

In China's spot market aluminium should trade at premiums of RMB 340-380/mt on Tuesday, predicts SMM.

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Aluminium inventory position tightened in China's five major markets on Monday after a month-long rise. SMM statistics showed aluminium stocks totalled 264,000 tonnes as of November 21, down 15,000 tonnes from November 17, due mainly to tightening of transport capacity, delayed arrival, and growing withdrawals by warehouses. The recent price gains are partly supported by these factors, feels SMM, which will continue in the short term until smelters turn from truck transport to railway transport.