Ups and downs fierce struggle between the two sides

Since entering March, aluminum prices did not find further highs as the market had expected, and even found a small decline. Up to now, the Shanghai Futures Exchange aluminum main contract to maintain 13500-14300 yuan / ton range, before the daily fluctuations up to 400-500 yuan/ton of the market temporarily difficult to find; LME aluminum basically maintained 1850-1950 US dollars/ton range. The market seems evenly divided between those with short positions and those who are long.

The bearish thought that there were three reasons: 1. Inventory pressure is increasing, since the beginning of the year, China’s social stock from the beginning of the year 367 thousand tons, and gradually increased to the end of 1.1 million tons, the growth rate as high as 215%. 2. According to the China National Bureau of Statistics data, from January to February, the national electrolytic aluminum production was 5.49 million tons, an increase of 20.66%, aluminum prices rose early to stimulate the expansion of aluminum plant expansion enthusiasm, resulting in aluminum production surge. 3. Downstream processing enterprises, despite the recovery since the beginning of the year, but the growth of consumption is far less than the growth rate of production, in particular, the increasingly strict environmental inspectors so that many small processing plants to stop production, further compression needs.

The bulls think there are four reasons: the recent two weeks has been a downward trend, it seems ushered in the inflection point. As of now China’s social stock is 1.1 million tons, with the previous high point has been reduced by 24,000 tons, I believe that with the continued recovery in demand, inventories will fall further. 2. Aluminum raw materials prices remain high, resulting in aluminum prices have a strong cost support, although the recent decline in alumina prices, but others like carbon, thermal coal, fluoride and other prices have been running strong. Aluminum smelting costs and the current price of aluminum is basically in the breakeven state, aluminum prices have limited space to fall much further 3. Environmental protection limited to not only affect the downstream, the supply side of the electrolytic aluminum also has an impact, with the heating season 28 city electrolytic aluminum limit 30% cuts, the market for future supply is expected to become stronger. A few days ago Henan Linzhou Linfeng Aluminum Co., Ltd. was affected, although not to the heating season but still limited production by 30%, and there are still 20*400KA electrolytic cell not started. 4. LME aluminum stocks fell significantly from the beginning of the first quarter of 2.2 million tons gradually down to the end of the quarter of about 1.95 million tons, and North America and Europe fell more obvious, while the international aluminum premiums continue to rise, LME aluminum will continue to maintain strong, thus driving China’s aluminum prices.

On the whole, I believe that the current aluminum price lacks clear guidelines, both long and short intense game, and each have a strong basis for support. Short-term aluminum prices are not expected to fluctuate significantly on the main contract and hover 13400-14100 yuan/ton, LME aluminum prices entangled in the 10 day moving average, but the long term, I believe that supply and demand fundamentals are still the determinant, and the probability of a larger bearish swing.

Thanks to Pinterest for the use of the feature image.