Will Chinese RRR cuts lift Aluminium, Copper?

The People’s Bank of China (PBOC) will reserve requirement ratio (RRR) by one percentage point, the central bank announced on Sunday.

The monetary stimulus will boost aluminium market, but any price rally should be limited, given the poor market fundamentals, Guoxin Futures told SMM. Guoxin Futures added that power tariff cuts will weaken cost support for aluminium prices, another factor that will arrest sharp price gains.

The recent rise in aluminium prices was aided by China’s pro-growth policies and hopes for more stimulus measures, rather than an improvement of market fundamentals, Hongyuan Futures told SMM. The chronic overcapacity means that this round of RRR cuts will have limited impact on aluminium prices, Hongyuan Futures added. 

Analyst from Guosen Futures agreed with the opinion and told SMM in an interview that the RRR cut will help ease worries triggered by last week’s poor economic releases. “That plus the slower growth in copper inventories during a high demand season will send copper up to 44,500 yuan per tonne, probably heading towards 46,000 yuan.”

“The monetary easing will definitely benefit copper market, and we now see copper to climb to 45,000 yuan per tonne,” chief analyst from COFCO Futures predicts.

However, analyst from Western Futures warned that the easing measures were also a reflection of fragile economy in China. Besides, it may take some time for these measures to produce results. “Thus, we expect copper to meet resistance at 45,000 yuan per tonne.”