LME aluminium headed further south, SHFE aluminium seeking support at US$1,988/t

LME aluminium prices are in retreat due to the supply side reforms initiated in China. Though Goldman Sachs holds a better price outlook for the light metal in the coming months (US$2,100 in 12 months), the recent price drop seems to be taking the sheen off the light metal to a certain extent. LME aluminium, which ended at US$US$1,930 per tonne last week Friday, closed further down at US$1,909 per tonne on Tuesday, May 2.

Reuters’ technical analysis suggests that LME aluminium may revisit its May 2 low of US$1,904 per tonne, following its failure to break a resistance at US$1,931. According to Shanghai Metals Market (SMM), LME aluminium should move between US$1,910-1,940 per tonne on Wednesday, May 3, with strong resistance at the 5-day, 10-day and 20-day moving averages while looking for support at the 60-day moving average.

As on May 2, LME official cash buyer price of aluminium stands at US$1,907 per tonne, cash seller & settlement price is US$1,909 per tonne, 3M buyer price is US$1,917 per tonne, 3M seller price is US$1,917.50 per tonne, Dec1 buyer price is US$1,953 per tonne, and Dec1 seller price is US$1,958 per tonne. The current LME official Opening Stock of aluminium is estimated at 1633325 tonnes, total Live Warrants is 991400 tonnes, and Cancelled Warrant is 641925 tonnes.

LME aluminium premiums, as on April 28, remain unchanged across major regions. LME Aluminium East-Asia Premium stands at US$110, LME Aluminium US Premium is US$215, LME Aluminium West-Europe Premium is US$95, and LME Aluminium South-East Asia Premium remains unchanged at US$15 (per tonne).

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The benchmark aluminium price at Shanghai Metal Exchange (SME) stands at US$2,002 per tonne on Wednesday, May 3, down 1.03 per cent from Tuesday’s benchmark price of US$2,023 per tonne.

Aluminium futures contracts traded on Shanghai Futures Exchange (SHFE) suffered a loss for the fourth day in a row. SHFE 1706 aluminium after opening at RMB 14,060 per tonne fell back to the 40-day and 60-day moving averages and closed down at RMB 13,830 per tonne because of short selling. SMM expects SHFE 1706 aluminium should look for support at RMB 13,700 per tonne (US$1,987.80).

Spot aluminium in China's domestic market is projected to trade at discounts of RMB 100-60 per tonne over SHFE 1705 aluminium on Wednesday, May 3.

Market focus will be on API US crude oil stocks, US April ADP employment, the euro zone’s Q1 GDP and March PPI, SMM says.