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SMM Daily Review – 2011/7/18 Aluminum Market
Jul 19,2011 09:54CST
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SHANGHAI, Jul. 19 (SMM) -- Most active SHFE 1109 aluminum contract prices opened slightly higher at RMB 17,535/mt on July 18.

SHANGHAI, Jul. 19 (SMM) -- Most active SHFE 1109 aluminum contract prices opened slightly higher at RMB 17,535/mt on July 18. During the day, after the longs regained confidence, SHFE 1109 aluminum contract prices surged and hit a recent high of RMB 17,720/mt. Total positions of SHFE 1109 aluminum contracts decreased by 1,890 lots. Meanwhile, positions for SHFE 1110 aluminum contracts hugely increased by 23,566 lots. Finally closed price for SHFE 1109 aluminum contracts was RMB 17,695/mt, up RMB 180/mt or 1.03% from previous trading day. With strong support from the longs, aluminum led SHFE metals to gain during the day. As market players were confident towards RMB 18,000/mt, market transactions hugely increased. SMM expects SHFE 1110 aluminum contracts to become the most active and test RMB 17,800/mt on July 19.

Mainstream traded prices for spot aluminum in Shanghai on July 18 were RMB 17,700-17,740/mt, with premiums of positive RMB 70-100/mt over SHFE current-month aluminum prices. In the morning, as SHFE aluminum prices surged, spot aluminum prices climbed to above RMB 17,700/mt. Spot premiums over SHFE current-month aluminum contract prices also jumped after the delivery date. With limited supply, the middlemen were actively purchasing goods. However, aluminum buyers in Wuxi were cautious towards purchases, with mainstream traded prices falling below RMB 17,700/mt. General market sentiment was active. In the afternoon, SHFE current month aluminum prices rose steadily, and spot aluminum prices rose to RMB 17,720-17,740/mt due to limited supply. Purchasers, however, remained cautious, and market transactions were hardly reported.

After Shanghai Composite Index stood steady at 2,800 points, investor confidence was improved despite high inflation pressure. The continuously decreasing spot aluminum inventories and summer power consumption peaks will both prevent aluminum prices from falling. As a result, SHFE aluminum prices surged despite LME aluminum prices struggled at USD 2,500/mt. As for the price trend in the future, a recent SMM survey shows that 53% of respondents are optimistic towards aluminum prices and the majority of these respondents expect aluminum prices to reach RMB 18,000/mt in the short term. The remaining 47% of respondents are neutral towards aluminum prices. These market players believe time is needed for aluminum consumption to follow up, therefore aluminum prices will remain at high levels.

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