LIVE FUTURES REPORT 20/03: SHFE aluminium price gains on supply concerns, continued US dollar weakness ahead of FOMC meeting

The aluminium price edged higher on the Shanghai Futures Exchange during morning trading on March 20 over supply concerns after Norsk Hydro shut down several smelters following a cyber-attack yesterday.

The most-traded May aluminium contract on the SHFE stood at 13,735 yuan per tonne, up by 0.04% from Tuesday’s close.

“Aluminium prices were also stronger after producer Norsk Hydro shut down several smelters after a cyber-attack. The company was forced to change to manual mode as the ransomware attack crippled its systems. For the moment, it should be able to cover the losses via inventories, but the company has warned the hiatus could affect customers if it lasts much longer,” Daniel Been, analyst at Australia and New Zealand Banking Group (ANZ), said in a morning note.

Meanwhile, short-covering interest has supported both LME and SHFE aluminium prices.

“The open interest in LME aluminium has declined since the start of the week, suggesting that the recent rally is being driven by short-covering…We expect aluminium to enjoy more short-covering pressure in the near term after the speculative community built an aggressive negative positioning on the metal,” Fastmarkets analyst Boris Mikanikrezai said in his latest Aluminium Today report.

Meanwhile, the dollar index was at 96.45 as of 10.06am Shanghai time, edging up 0.06% from its previous close ahead of the Federal Open Market Committee (FOMC) meeting  tomorrow at 2.00am Shanghai time, with the expectation in the markets being of a more dovish tone from the FOMC. That could cap any near-term gains for the US dollar despite it still being well below a multi-month peak of 97.72 reached on March 7.

“Financial markets lack clear direction ahead of tomorrow’s FOMC announcement, where the committee is expected to cut its median dot points and provide guidance on ending balance sheet normalization…US data releases continued to point to ongoing weak investment to start 2019, which plays into the cautious guidance that the Fed has been giving,” Daniel Been added.

Other highlights
   – In equities, the Shanghai Composite was down 0.5% to 3,075.37 as at 11.24am Shanghai time.
   – In US data on Tuesday, factory orders edged up 0.1% in January, weaker than the expected 0.3% rise.
   – In European data, UK Consumer Price Index (PPI), Producer Price Index (PPI) and Retail Price Index readings are expected to be released today.
   – In Australian data today, the unemployment rate will be released.