SMM Aluminium Price Forecast (Aug. 29-Sept. 2)

SHFE 1111 aluminium contact prices moved below the 60-day moving average, with prices mainly moving between RMB 17,150-17,350/mt last week. Trading sentiment was sluggish, with daily trading volumes falling to around 50,000 lots. Investors mainly made short-term speculative transactions, keeping mainstream prices between RMB 17,200-17,300/mt. SHFE aluminium inventories fell continuously, and positive market fundamentals helped SHFE aluminium prices fall slower than other metals prices, but investors were cautious and moved goods actively for profits, helping erode upward momentum of SHFE aluminium prices and allowing SHFE aluminium prices to rise slower than other metals prices. SMM predicts SHFE 1111 aluminium contract prices will struggle at the 60-day moving average, but consolidate at RMB 17,200/mt.

The tightening credit supply at month’s end further depressed downstream buying interest, with purchases rarely seen after spot aluminium prices hit RMB 17,800/mt. Spot aluminium inventories stayed near 310 kt. Selling interest was high among goods holders with premiums of more than RMB 200/mt over SHFE current-month aluminium prices, thereby keeping traded prices between RMB 17,750-17,800/mt. However, as downstream enterprises expected aluminium prices to drop, market transactions were sparse, forcing goods holders to successively lower their quotes during second half of the week. Buying interest nevertheless remained low as a strong wait-and-see sentiment prevailed downstream. SMM believes downstream consumption will remain weak and spot aluminium prices will hover above RMB 17,700/mt, with spot premiums over SHFE current-month aluminium contract prices expected to fall below RMB 200/mt.