Reuters projects aluminium will face the worst week in 18 months on China’s growing output

According to a Reuters report, LME aluminium showed some upward movement on Friday and was on a positive territory, the metal is set to face the worst week since May 2016 from Monday. The fall is primarily driven by growing aluminium output in China despite the capacity cut plans and execution. Speculative investment flows subsided on caution over less than expected Chinese capacity cuts.  

Benchmark aluminium bid price on the London Metal Exchange was at USD 2,089 and offer price was at USD2090 a tonne. The metal fell to its lowest since Sept. 15 on Thursday at USD 2,078.

“In China, it looks like the actual policy translation is not as strong as initially expected,” said ETF Securities’ Nitesh Shah. He added that smelters were not cutting as much capacity as initially expected. The market is concerned with the apparent futility of the capacity cut programme IN China looking at the growing capacity. This is affecting market sentiments and translating into a prices retreat which is expected to be severe in the coming week.

The world’s biggest producer of aluminium is expected to cut millions of tonnes of aluminium capacity during the winter to combat air pollution which pushed aluminium prices higher throughout 2017.

Stocks in LME warehouses fell to their lowest since September 2008, down 3,600 tonnes to 1.16 million tonnes. But stocks in Shanghai inched higher this week to a record 666,581 tonnes.

A Reuters poll of 29 analysts this week showed that aluminium prices have already peaked. Analysts expect an average 2018 price of $2,038 a tonne.