Trading slows down on SHFE aluminium price drop; more capacity to come online in China by 2018

According to a Shanghai Metals Market analysis, SHFE 1711 aluminium will move within a range of RMB 16,280-16,450/t over the day, testing support at the 20-day moving average, after the big drop today. In east China’s spot aluminium market, spot discounts are expected at RMB 200-160/t over SHFE 1709 aluminium contract.

SME aluminium price graph

SMM Aluminium premiums in Guangdong over Shanghai narrowed slightly to around RMB70 /tonne on Tuesday.  Mainstream traded prices were 16,230-16,250 yuan/tonne in Guangdong market. The drop in SHFE aluminium price has generated a strong wait-and-see sentiment among buyers, causing a slowdown in trading activities. 

On the other hand, stocks in China are expected to add up more with legal new and idled capacity coming into operations very soon. According to SMM, Qujing Aluminum Co. brought back about 380,000 tonnes per annum of aluminium capacity into operation. The capacity had been idled for four years.

In another update, Baise City in Guangxi Province has set ambitious goals for local alumina, aluminium and aluminium processing capacity in 2018. By 2018, the city will increase the total alumina capacity to 10 million tonnes, aluminium capacity to over 2.6 million tonnes and aluminium processing capacity to more than 3.2 million tonnes. This indicates the huge amount of legal capacity that is going to come online in 2018 despite the capacity cut plans.