Aluminum Market Cools with High Prices, Tight Capital, Weak Consumption

SHANGHAI, Aug. 2 (SMM) -- The SMM China Aluminum Ingot Trade Index during July 25th to July 29th fell below the balance line of 50% to 46.9%, down by 4.5% from previous week. SHFE aluminum prices surged with strong long momentum during the week, with unwillingness to sell remaining strong among goods holders. However, as tight month-end capital supply dampened the already weak consumption, domestic aluminum ingot trade market cooled down with climbing aluminum prices during the week. More details can be found in “China Aluminum Ingot Trade Market Weekly 110801”.

In order to objectively and accurately show China’s spot aluminum ingot trading market, SMM has surveyed spot aluminum ingot traders from different regions, of different types and scales, based on their total traded volumes, downstream purchase volumes, traders inventories, cash flows and employee numbers etc.

This survey has covered 35 aluminum traders with a total monthly traded volume over 360 kt. These traders are located in Shanghai, Wuxi, Hangzhou, Nanhai, Tianjin and Shenyang.

The SMM China Aluminum Ingot Trade Index – Transaction Index fell to the balance line of 50%, down by 5% from previous week. As aluminum prices further climbed, reduced downstream orders led to lower purchase volumes which were made on an as-needed basis. Meanwhile, middlemen also turned cautious after aluminum prices surged high. As a result, market transactions in domestic spot aluminum market slightly fell.

The SMM China Aluminum Ingot Trade Index – Downstream Consumption Index fell quickly to 32.9%, down by 10.9% from previous week. Production activities at aluminum ingot processors are the least in summer. Power shortage in certain regions and sluggish terminal consumption also led to lower order volumes. However, aluminum prices continuously climbed despite current low-demand season, dampening processors’ purchasing interest which was already low due to month-end capital pressure.

The SMM China Aluminum Ingot Trade Index – Aluminum Price Expectation Index fell slightly to 71.4%, down by 7.4% from previous week. After aluminum prices experienced accelerated rising for two successive weeks, optimism towards aluminum prices slightly fell. Downstream consumption turned sluggish due to high prices. If spot aluminum inventories start to increase, and/or the longs exits the market etc., upward momentum of aluminum prices will be reduced. Though most market players remain optimistic towards aluminum prices, pessimistic sentiment is forming.

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