- Chinese SHFE stocks for 11 consecutive weeks
- Seasonal demand expectations provide support
LME aluminium prices strengthened in the week ended 4 September, with three-month aluminium prices rising 1.6% w-o-w to $3,294/t from $3,242/t. Prices remained supported by tight exchange availability, while improving market sentiment and expectations of stronger seasonal demand in China provided additional support.
Meanwhile, LME aluminium inventories declined 850 t (0.3%) w-o-w to 245,975 t. Stocks were also 5.7% below the 260,900 t recorded at the end of August, highlighting relatively tight exchange availability and providing an underlying floor to prices.
Key drivers behind price rise
Tight physical availability and continued inventory drawdowns supported LME aluminium prices during the week. LME stocks fell to 245,975 t, their lowest level since 1990, and have declined by more than 50% from 507,275 t at the end of January. In China, SHFE aluminium inventories have fallen for 11 consecutive weeks, declining by around 26% from a six-year high of 528,885 t in June. The sustained drawdown across major exchanges indicates tightening visible inventories and provided fundamental support to prices.
Market sentiment also improved on expectations of a seasonal recovery in Chinese aluminium demand as the September-October peak season begins. However, the recovery remains gradual, with downstream operating rates improving only marginally. In India, subdued buying amid the monsoon season and high prices continued to limit physical demand. Meanwhile, recovering Middle East supply reduced concerns over prolonged supply disruptions and could restrict further gains.
LME aluminium inventories declined to 245,975 t during the week, extending the recent downward trend. Although the latest weekly decline was modest, stocks remained significantly below the end-August level, keeping deliverable metal relatively tight. Continued inventory drawdowns could provide further support if physical demand improves during the upcoming peak season.
Outlook
LME aluminium prices are expected to remain range-bound with a firm undertone in the near term. Low exchange inventories, continued Chinese destocking and expectations of stronger seasonal demand should provide downside protection and support prices. However, the gradual recovery in Chinese demand, subdued downstream buying in India and recovering overseas supply could limit further gains. A faster decline in global inventories or renewed supply disruptions could push prices higher, while weak downstream demand, improved availability and profit-taking may cap the upside. Overall, prices are likely to remain supported at lower levels, but a sustained move higher would require clearer evidence of stronger physical demand and tighter global supply.
Leave a Reply