SMM Daily Review - 2010/1/6 Aluminum Market

SHANGHAI, Jan. 7 (SMM) -- SHFE aluminum prices jumped yesterday, with a growth exceeding 4%, and SHFE 1003 aluminum contract has risen by its 5% daily limit. SHFE 1004 aluminum contract stood above RMB 18,000/mt, and closed at RMB 18,160/mt, while SHFE spot-month aluminum contract inched up to RMB 17,660/mt, and closed at RMB 17,560/mt. Trading sentiment was brisk, and positions of SHFE three-month aluminum contract increased by 17,466 lots to more than 160,000 lots, and total positions have exceeded 400,000 lots. The speculative funds have played a major role in pushing up SHFE aluminum prices, since the heavy snow in North China has caused railway transportation disruption and supply shortages of coal and electric power, which in turn affected production negatively.

In spot markets, large and medium smelters including CHALCO were reluctant to move goods upon their optimistic market outlook, limiting market supply, while traders stockpiled goods as well. In this context, spot aluminum prices jumped supported by limited market supply and soaring SHFE aluminum prices, with prices in the RMB 17,250-17,300/mt range in the morning, and offers for spot aluminum have been heard between RMB 17,400-17,500/mt, with poor sales reported. SMM predicts aluminum prices will fluctuate around RMB 17,500/mt today, and struggles between suppliers and buyers at high prices will continue, since downstream consumers can not accept current high prices temporarily.

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