Slow consumption and growing stock to put pressure on China aluminium prices

On last Friday’s night trading, all base metals on SHFE including aluminium fell back and registered obvious declines, except copper. Prices are expected to fluctuate at highs after fallback. SHFE aluminium is expected to hover within a range of RMB16,150-16,450/t on Monday, August 28.

In another update, SMM observes that aluminium stocks in China’s seven major markets have added another 57,000 tonnes week-on-week to 1.53 million tonnes this week. The growth in stock is mostly driven by slow consumption

Due to off-season slow demand and higher aluminium prices, downstream producers are buying cautiously and working with stocks in hand.  Some downstream producers have halted production as a result of environmental inspection which has further affected aluminium demand. Aluminium producers have also cut exports after the rise in SHFE/LME aluminium price ratio.

The rise in aluminium stocks may begin to slow down or may begin to fall with the arrival of high-demand season in September. However, whether aluminium market in China will see any significant drop in stock will depend on the supply side reforms and consumption trends. Though supply side reforms and environmental crackdowns were meant for primary metals they have affected downstream sectors too hurting aluminium consumption.

In the near term, growing stocks and weak consumption will continue to put pressure on aluminium prices in China.