SMM Daily Review - 2011/9/13 Aluminum Market

SHANGHAI, Sept. 14 (SMM) – Most active SHFE 1111 aluminum contract opened lower at RMB 17,430/mt on the first trading day following China’s Mid-Autumn Festival. Due to a bearish economic environment, domestic investors successively exited the market. Transactions during the day were less than 30,000 lots and positions of the contract saw a huge decrease of 1,702 lots. After narrowly fluctuating near RMB 17,400/mt, the contract finally closed at RMB 17,390/mt, down RMB 75/mt or 0.43%. Though SHFE aluminum closed lower due to pressure from global financial market, the metal avoided a large-scale selling backed by positive fundamentals. It also reported less loss compared with other base metals. Since market sentiment will be cautious while waiting for coming conventional peak season, SMM expects most active SHFE aluminum contract to test RMB 17,450/mt in the short term.

Mainstream traded prices of spot aluminum in Shanghai were between RMB 17,780-17,810/mt on September 13th, with discounts of RMB 10/mt to premiums of RMB 20/mt over SHFE current-month aluminum prices. In the morning, though SHFE current-month aluminum prices narrowly fluctuated at RMB 17,800/mt, purchases and requires were rarely seen as downstream buyers were pessimistic towards future aluminum prices. Meanwhile, some goods holders who were cautiously bearish towards future aluminum price trends actively sold their goods at lower prices, with slight discounts being reported. Other goods holders, on the contrary, were unwilling to sell goods at lower prices due to relatively stable aluminum futures prices. Overall market transactions were sparse due to a standoff between sellers and buyers. In the afternoon, SHFE current-month aluminum price maintained narrow-range fluctuation, market transactions turned even more sluggish due to strong wait-and-see sentiment. Only a few quotations at RMB 17,780/mt were heard, but transactions were rarely seen due to a lack of purchases.

SMM average aluminum ingot price during the week from September 5th to 9th was RMB 17,794/mt, with a slight dip of RMB 16/mt or 0.09% from previous week.

A recent SMM survey shows 64% of market respondents are neutral towards aluminum price trend of this week. These respondents expect aluminum price to keep fluctuating within a narrow range before consumption improves, as low market confidence caused by weak global economy will be offset by positive fundamentals including remaining low stock and reduced output due to power restrictions in certain regions in South China.

26% of respondents are pessimistic, since aluminum consumption is damped due to deteriorating inflation and debt woes, and even though China’s conventional peak season has started, demand growth is not seen at present. Therefore, aluminum price will more likely move down during this four-trading-day week with sluggish investor confidence in financial markets.

Remaining 10% of respondents, on the contrary, are optimistic. They believe downstream growth, though stagnated at present, will show this week as there are already signs of production recovery. With positive fundamentals, upward momentum of aluminum price still exists, which will help aluminum price climb this week.