SHANGHAI, Oct 17 (SMM) - The most-traded SHFE 2211 aluminium contract opened at 18,310 yuan/mt last Monday, with its weekly low and high at 18,210 yuan/mt and 18,865 yuan/mt respectively before closing at 18,830 yuan/mt on Friday afternoon, up 560 yuan/mt or 3.07% from pre-holiday level. LME aluminium opened at $2,285/mt last Monday, with its weekly low and high at $2,191/mt and $2,400/mt respectively before trading at $2,381.5/mt as of CST 15 on Friday, up $104.5/mt or 4.22% on the week.
Macro front: The United States announced on Wednesday that it was considering a ban on imports of Russian aluminium, shoring up LME aluminium prices. On Thursday night, the US released its consumer price index (CPI) in September, which rose 8.2% year on year and 0.4% month on month, both higher than market expectations. This intensified expectations for further interest rate hikes in November, weighing on LME aluminium prices. In China, new social financing totalled 3.53 trillion yuan in September, while new RMB loans hit a record high of 2.47 trillion yuan. The 20th National Congress has come under the spotlight.
Fundamentals: As of early October, the domestic operating aluminium capacity dropped to 40.28 million mt, according to SMM data. The resumption of aluminium capacity in Sichuan and Guangxi has been slow. Inner Mongolia Baiyinhua Co.’s new capacity is expected to reach full production at the end of the year. The domestic operating aluminium capacity is likely to recover to 40.7 million mt by the end of October. The LME’s discussion over a possible ban on Russian metal transactions was followed by US announcement that it was considering a ban on imports of Russian aluminium, sparking concerns over a supply shock. The operating rates of domestic downstream aluminium processing enterprises have recovered to the pre-holiday levels. Orders for industrial extrusion and automobile-related products increased significantly, while the demand from photovoltaic sector also improved significantly.
To sum up, SHFE aluminium moved upwards after the holiday, especially on Friday when overseas supply woes and digestion of bearish macro factors encouraged bulls to enter the market. The aluminium ingot social inventory in China did not accumulate substantially after the holiday and remained at a low level. High energy prices in China and overseas will provide solid cost support. The most-traded SHFE 2211 aluminium contract is expected to climb further to 18,300-19,300 yuan/mt this week, driven by eased oversupply pressure and improved demand. LME aluminium will underperform SHFE aluminium due to enormous uncertainties overseas and growing LME aluminium inventory, with prices expected between $2,150-2,450/mt.
