Aluminium stocks in LME-listed warehouses totaled 1.354 million tonnes on Tuesday, down from a recent peak of 1.356 million tonnes at the end of April, reflecting slower inflows. Still, 625,350 tonnes have been delivered on-warrant so far in 2020, the bulk into Asia. Fresh cancellations have featured recently - 14.4% of stocks are booked for removal at present, up from 8.7% on April 21.
Shanghai Futures Exchange aluminium stocks totaled 388,899 tonnes on May 8, down from 533,994 tonnes on March 20, which reflects rising downstream demand. And while China's aluminium production remains on an upward trajectory, increasing by 2.7% year on year in the first quarter, plans to stockpile non-ferrous metals announced by provincial governments will reduce pressure for much-needed producer discipline.
The latest figures from the International Aluminium Institute (IAI) show global production (excluding China) totaled 2.377 million tonnes in March 2020 compared with 2.357 million tonnes in January 2019.
Still, falling aluminium prices are increasing the pressure on producers elsewhere, which also increases the risk of smelter closures.
Because of the impact on aluminium demand created by quarantine measures to slow the spread of the Covid-19 pandemic, Fastmarkets now forecasts the global aluminium market to record a surplus of 4 million tonnes in 2020 compared with the 685,000-tonne surplus registered in 2019, according to the World Bureau of Metal Statistics (WBMS).
In the physical market, the Brazilian import aluminium premium slid to a 42-month low in the week ended Tuesday May 5. Short-covering provided modest support to spot aluminium premiums in Japan.
The latest commitment of traders (COT) data shows net short exposure in LME aluminium widened by 1.969 lots to 31,788 lots in the week to May 1, with further short selling negating an increase in new longs.
We maintain our short-term outlook that aluminium prices need to clear immediate resistance from the 20 DMA to avoid follow-though selling pressure, which risks aluminium extending to fresh lows around $1,400 per tonne based on the current chart configuration.
All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.