Weekly highlight: A robust dollar kept LME and SHFE aluminium under pressure over the week; trend likely to continue

The US dollar held near a two-month high in the beginning of the week as investors await the latest monetary policy decision from the Federal Reserve as well as developments from US-China trade talks. The US dollar sharply rose on Wednesday, hitting a two-year high against a basket of other currencies and the index gained 0.5% to end at 98.554. The US dollar remained robust till Friday. Most LME base metals traded mixed over the week within a close range. SHFE followed similar trend.   

The stronger greenback took a toll on aluminium prices over the week. LME aluminium traded lower within a close range. LME aluminium started the week with US$ 1774.5 per tonne and traded mixed to reach the week’s high of US$ 1781.5 per tonne on Wednesday. Three-month LME aluminium also followed the same downward trend starting the week higher at US$1,814.5 per tonne on Monday and ending at US$ 1777.50 per tonne on Friday. 

As on August 2, Friday, LME aluminium cash (bid) price stood at US$ 1748.50 per tonne, LME official settlement price stands at US$ 1749 per tonne; 3-months bid price stands at US$ 1776.50 per tonne, 3-months offer price is US$ 1777.50 per tonne; Dec 20 bid price stands at US$ 1878 per tonne, and Dec 20 offer price stands at US$ 1883 per tonne.

The LME aluminium opening stock increased yesterday to 1024200 tonnes. Live Warrants totalled at 774675 tonnes, and Cancelled Warrants were 249525 tonnes.

LME aluminium 3-months Asian Reference Price is hovering at US$ 1781 per tonne.

SME and SHFE Aluminium Price Trend

The benchmark aluminium price on Shanghai Metal Exchange (SME) performed better than LME and starting the week at US$ 2015 per tonne and reaching US$ 2024 per tonne midweek.  The prices continued within that range and closed the week lower at US$ 1998 per tonne.  

The most liquid SHFE September contract started the week higher at RMB13,900 per tonne and continued higher in next few days. The contract gave up some gains to close at RMB 13,795 per tonne on Friday, with resistance from RMB 13,840 per tonne. Domestic higher inventories of primary aluminium suggested slow downstream consumption, which may keep the contract low over next week at RMB 13,800-13,900 per tonne.

Weakening consumption and lower costs will weigh on SHFE aluminium in the short term, but the anticipation of a consumption recovery at the end of the third quarter will offer support.