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.
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