Last week, with the “May Day” Labor Day ended, the market traders have returned to the market. But the holiday season did not arrive quickly enough. Aluminum prices as a whole maintained weak conditions; the Shanghai Futures Exchange aluminum main contract has not been able to break 14000 Yuan/t mark, and even tested the 13,500 yuan/t mark. Meanwhile the international LME aluminum prices are also falling step by step, breaking the $ 1,900/t line.
Meanwhile inventory is rising. As shown below, as of yesterday, the domestic five major spot market stocks totalled 1225 thousand tons, up 21,000 tons last week, still showing growth though the growth rate has slowed down significantly. In addition, according to my statistics, Xinjiang railway station has about 51.2 thousand tons of inventory, down 13.5 kilotons last week. It can be said that with the improvement of transport conditions in Xinjiang, most of the supply has been sent to the spot market, factory inventory pressure is significantly weakened.
For demand, May will soon usher in a wave of consumption season, but this year environmental factors are creating a certain degree of uncertainty. China’s National Bureau of Statistics released data showing the first quarter of 2017 China’s real estate sales were 29.0 million square meters, an increase of 19.5%, though the growth rate is down from 2016 by 3 percentage points. Although the real estate market for aluminum consumption boost still exists, the growth rate has begun to slow down. In addition, the automotive industry in the first quarter of this year exceeded 900,000 tons of aluminum, compared with the same period last year increased by more than 8%, growth rate of more than 2 percentage points increase. It can be said that the transportation industry is still the fastest growing areas of aluminum consumption.
On the news side, following the announcement of Xinjiang cleaning up illegal production capacity, Shandong provincial government held some non-public meetings to discuss the clean-up capacity issues. The official documents have not yet come out, but from what we can see, Shandong has built illegal production capacity of between 2 and 5 million tons. We expect the total amount of shuttered illegal capacity in Shandong province will eventually exceed Xinjiang.
Internationally, the US April employment data was sharply higher than expected, the Fed interest rate further improved, the dollar index also changed last week’s decline, has rebounded this week; the euro zone with the election of the French president, risks gradually dispersing, I believe will give the macro market a trace of good.
In summary, the current macro-long and short intertwined, fundamental aluminum industry supply surplus contradiction has not been resolved, and the market’s focus is still on the Chinese government’s production capacity policy, and what they do about it. The price will continue weak trend, The next week, the Shanghai Futures Exchange aluminum main contract operating range 13500-14000 Yuan/ton; international LME aluminum prices to maintain 1850-1950 US dollars/ton.