China's Aluminium prices drop, supply loosens further

Domestic prices of primary aluminum in China fell during June 21-28, reflecting bearish market sentiment fuelled by concerns about demand. Meanwhile, domestic aluminum supply increased some more, market sources observed.

By June 28, the country's national price of 99.7% primary aluminum ingot under Mysteel's assessment had eased to Yuan 19,270/tonne ($2,872.6/t) including 13% VAT, down by Yuan 650/t or 3.3% on week.In the futures market on the same day, the most-traded aluminum contract on the Shanghai Futures Exchange (SHFE) for August delivery also closed the daytime trading session lower at Yuan 19,445/t, dipping by Yuan 185/t or 1% from the settlement price on June 21.

Over the past week, global commodity prices continued to reverberate in response to the US Federal Reserve's aggressive lifting of the benchmark interest rate on June 15, a Shanghai-based analyst commented. "Domestic commodity markets including aluminum were also impacted," she said. Meanwhile, demand for finished aluminium products from China's domestic end-users is still soft, even though the disruptions to industrial activity caused by the COVID-19 resurgence have eased further.

The gloom pervading the real estate market is a major concern, Mysteel observed.Consequently, ingot purchasing in the spot market among aluminum processors and fabricators was still cautious over the past week, with most only procuring for their near-term production needs. According to Mysteel's data, the stocks of primary aluminum at SHFE-licensed warehouses and in 16 Chinese cities under Mysteel's tracking continued to shrink during the past week to 766,000 tonnes as of June 27 - down by another 22,000 tonnes or 2.8% on week and the lowest since late-January.

However, the pace of the decline had slowed slightly compared with the previous week.On the other hand, Chinese aluminum smelters nudged up their production over June 16-22, with primary ingot output among the 89 smelters nationwide under Mysteel's tracking lifting by a minor 0.2% on week to around 796,900 tonnes.

Written by Victoria Zou, zyongjia@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint