FOCUS: Aluminium traders shy away from wide open SHFE arbitrage

The disconnect between London Metal Exchange and SHFE aluminium prices has opened an arbitrage window to China but the international aluminium market is wary of taking advantage of it, Fastmarkets understands.

The front-month aluminium contract on the SHFE last traded at 13,235 yuan ($1,855.41) per tonne on Tuesday May 26 while the LME aluminium three-month price closed at $1,506.50 per tonne on Friday May 22.
The arbitrage window to send metal to China opened for the first time since 2016 on May 6, registering a marginal profit of $4.22 per tonne, Fastmarkets’ price data shows. Profits have widened since then, reaching as high as $53.35 per tonne and $44.28 per tonne on May 18 and May 19 respectively.
Stronger macroeconomic indicators such as an increase in new home sales in China spurred a rise in the SHFE price, while the LME price fell because of weaker macroeconomic conditions due to Covid-19-related lockdowns in the west.

Many traders told Fastmarkets that although some deliveries have gone to China, they do not expect the arbitrage...


Justin Yang

Alice Mason

May 26, 2020

15:12 GMT