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Aluminium prices have continued to drift and in mid-March even broke below key technical support around $2,085 per tonne where the 200-day moving average coincided with an uptrend line drawn through the September 2016 and December 2017 lows.

What has dragged down aluminium has been the continuing build in SHFE inventories to a series of record highs, despite Chinese smelter capacity being suspended to ensure ‘blue skies’ during the winter heating season. That suspended capacity was free to restart in mid-March, which suggests that the domestic market fundamentals will weaken further. However, April should also see a seasonal pick-up in demand, and if this is robust enough to offset the production increase and create the perception that SHFE stocks have peaked, prices may stabilize in Q2. But now the market has the threat of trade wars to worry about. At the moment this is playing out premiums, but it is also a headwind for prices as it has sapped risk appetite.

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