Last week, news of Shandong Government cleaning up illegal aluminum production came out, but the content is disappointing. The ambiguous description of the document didn’t give the market a jolt; aluminum prices only maintain a small run, the SHFE aluminum prices rebound a little in the main aluminum futures contract after hitting 13500 yuan/ton mark, but the international LME aluminum price is better back to more than $1900/ton.
Supply: As shown below, until yesterday inventory of the five largest spot markets in China is 1.1 million tons, 122.5 kilotons less than last week. The stock inflection point appears again and the aluminum inventory reduced again and may bring some support for the price of aluminum. But note that, influenced by the the lower price of alumina, costs of electrolytic aluminum smelting have decreased significantly. Compared to the current price of aluminum, aluminum factories can remain profitable, so their production enthusiasm is high.It is expected that electrolytic aluminum production will remain high continuously in the future, supply pressure will not ease in short-term .
Demand: Early last week downstream processing market enthusiasm was high, but as the aluminum price chase the weaker levels, they began to doubt whether price rises will be sustained. Delivery volume declined. The overall consumption level is a little better than last week. Although consumption is slightly better than last week, affected by the news many processing plants are stocking up, not having real demand. Taking into account environmental factors, in the next week, aluminum consumption will be difficult to have a significant boost.
Policy: The Chinese de-capacity policy dispersed, and the ambiguous attitude of many local government disappointed the market. Recently the opening of “One Belt One Road” Forum meeting brings new prospects for the future of aluminum industry investment. In the next week , The Euro-zone will release international trade balance, GDP and other relevant economic data, optimism is expected to be greater , while the dollar index is favourable for dollar-denominated commodity prices, including aluminum.
In summary, the current macroeconomic signals are good, though fundamentals are under pressure. Under condition of no substantive progress from national policy, supply pressure and consumption are limited, the price of aluminum lacks power, and is difficult to rise sharply. In next week, the aluminum price is expected to rise first and then fall. Aluminum main contract of the SHFE is running range 13700-14200 yuan/ton; international LME aluminum price will be maintained at US$1860-1920/ton .