SHANGHAI (SMM): Aluminum prices are on the rising track recently, and average spot price of A00 aluminum ingot was up to 14,360 yuan per ton on Aug. 29 in the Shanghai market, a gain of 7.73% from Jun. 30, Shanghai Metals Market data showed.

Rising aluminum prices helped narrow losses at domestic aluminum producers during 1H.

Aluminum Corporation of China (Chalco) reported in its interim financial results a decline in losses during 2Q thanks to aluminum price gains, down by 190 million yuan to 1.967 billion yuan.

Is it going to continue?

There is no doubt that sustainable gains in aluminum price will be a key for Chinese aluminum smelters to loss reduction.

Rising alumina prices and continuous declines in aluminum inventories are two major reasons behind recent aluminum price increases. The drop both in China’s major markets and LME reportable aluminum inventories, however, is not enough to reflect aluminum consumption.

According to SMM sources, Chinese aluminum producers now prefer to sell aluminum liquid directly to near-by fabricating plants, to produce aluminum bar, alloy, or ingot. This will reduce supplies of goods to east and south China, bringing stocks there down.

Besides, competition in domestic aluminum bar market is intensifying. Growing supply and anemic demand in the property market sent down processing fees for aluminum bar to 400-500 yuan per ton from the 600-700 range, according to SMM data.

Chalco cites no reason for optimism over the market outlook for the rest of the year in its financial reports.

Source: Shanghai Metals Market