SHFE Aluminium to lack rising momentum

SHFE 1607 aluminium will struggle around the 5-day moving average and move at RMB 12,050-12,200/mt on Monday.

LME aluminium will remain weak at USD 1,530-1,550/mt.

In China’s spot aluminium market, spot discounts of RMB 0-10/mt and spot premiums of RMB 0-30/mt are expected over SHFE 1605 aluminium contract.

Key macroeconomic indicators for base metal prices

Base metals may enter downside track this week due to poor reading of economic figures from China released last weekend.

US April new home starts are expected to fall slightly to 1 million units as March building permits have posted losses for four weeks in a row on the monthly basis. But US April home sales remained red-hot thanks to expectation for low interest rates. The 30-year fixed-rate mortgage (FRM) slipped from above 4 per cent at the end of January to 3.8 per cent due to cooling expectation for rate hike by US Fed in H1. Eyes will be on US Fed April rate meeting minutes due for release on Thursday.

A big bag of economic figures from China issued last weekend are disappointing, including April credit loans, investment, retail sales and value-added at large industrial enterprises.

The M2 money supply slowed 0.6 percentage point YoY to 12.8 per cent in April but M1and M0 supply quickened 0.8 percentage point and 1.6 percentage points respectively on the yearly basis. This meant that funds deposited by the non-depository financial institution in depository financial institution are decreasing.

It cannot be denied that liquidity growth in China slowed sharply in April. New RMB loans totaled RMB 556 billion in April, missing the RMB 800 billion the markets had expected. The April private fixed-asset investment registered 5.2 per cent growth, only half of that guided by government. As such, economic figures from China will pose downward pressure on base metals this week.