SMM Survey: 32% of Chinese smelters bullish toward aluminium prices this week

Almost 32% of the 38 Chinese aluminium smelters surveyed by SMM are bullish toward this week’s aluminium prices. Another 52% expect prices to stabilize, while the rest 16% paint a gloomy picture.

The optimists expect LME aluminium to return above USD 1,525/mt and SHFE 1602 aluminium to rise above RMB 10,400/mt. aluminium production cuts in China are still on the rise, as reflected in a three consecutive week of decline in aluminium stocks in China’s five major trading markets. Spot discounts in China shrank to near RMB 100/mt, due to signs of tightening supply in east China. Rumors about SRB stockpiling will also keep shorts cautious about entering.

Those neutralists see SHFE 1602 aluminium hovering between RMB 10,200-10,400/mt, and USD 1,500-1,525/mt for LME aluminium. They see negative economic data and growing hopes for rate hike by the US Fed as constraint on the light metal. Positions of SHFE 1602 aluminium contracts are dominated by shorts, which will also prevent prices from rising. Short-covering is expected, though, after aluminium prices fall back, in turn, limiting downside space.

The rest are worried that LME aluminium will fall below USD 1,500/mt and SHFE 1602 aluminium will drop below RMB 10,200/mt. Downstream demand is unlikely to pick up as the traditional off-season has set in. Alumina prices in China have fallen to near RMB 1,700/mt since the beginning of November, a loss of up to 15%. This will weaken cost support for aluminium prices.