Weekly update: LME recovered from a depressing week; SHFE traded strong on consumption recovery

The US dollar continued to rise to a more than two-year high of 99.13 on expectations of an upcoming interest rate cut by the Federal Reserve. After holding it for two days, the dollar dropped 0.55% against a basket of major currencies, to 98.38, marking its biggest one-day loss in three months. The dollar held its earlier losses and helped base metals recover from the earlier losses. LME base metals recovered from the depressed trend over this week and SHFE aluminium continued to trade strong due to positive fundamentals.

LME aluminium started the week with US$ 1716.5 per tonne and continued trading higher to close the week at US$ 1761.5 per tonne on Friday September 6. Three-month LME aluminium started the week at US$ US$ 1745.50 per tonne and ended it 2.4% higher at US$ 1787.50 per tonne after Friday’s closing. Three-month LME aluminium closed higher for the fourth consecutive trading day in this week as departing shorts shot it higher.   

SME and SHFE Aluminium Price Trend

SHFE aluminium continued trading higher as the social inventories of primary aluminium in China continued dropping suggesting that consumption picked up in a peak season.

The buildup of long positions lifted the most traded SHFE 1910 contract above the five- and 10-day moving averages to a one-week high of RMB 14,365 per tonne in the beginning of the week and it ended 0.74% higher at RMB 14,355 per tonne on September 2. The contract reached RMB 14,370 per tonne mid-week. An over 4,000-lot buildup of long positions bolstered the most traded SHFE 1910 contract to a high of RMB 14,430 per tonne, refreshing the highest since August 20, when unexpected disruptions grew concerns about supply.

Falling inventories and limited supply pressure shored up aluminium prices, but upside from here was limited by the slow pace of demand recovery. SHFE aluminium is expected to hover between RMB 14,300-14,450 per tonne over next week.