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SMM Daily Review - 2011/9/26 Aluminum Market
Sep 27,2011 09:46CST
price review forecast
Most active SHFE 1112 aluminum contract closed at RMB 16,000/mt, down RMB 470/mt or 2.85% from previous trading day. Spot aluminum traded between RMB 16,980-17,020/mt in Shanghai.

SHANGHAI, Sept. 27 (SMM) -- Most active SHFE 1112 aluminum contract opened lower at RMB 16,400/mt on September 26th, and climbed to an intraday high of RMB 16,678/mt in the morning on profit-taking by the shorts. That compared to losses in all other commodity prices. In the afternoon, LME aluminum plunged below the USD 2,200/mt mark on intensive selling for commodities, the most active SHFE aluminum contract also plummeted immediately following its afternoon opening to RMB 15,850/mt, a new yearly low. However, with the profit-taking wave at the tail of trading by the shorts, the contract rebounded and finally closed at RMB 16,000/mt, down RMB 470/mt or 2.85% from previous trading day. Total positions of the contract decreased 3,378 lots to 117,902 lots, while transactions surged to 221,000 lots during the day. This was a typical bear market as responded by the RMB 825/mt price gap. SMM expects the contract to test RMB 16,000/mt in the short term.

Traded prices of spot aluminum in Shanghai were between RMB 16,980-17,020/mt on September 26th, with premiums of RMB 180-200/mt over the SHFE current-month aluminum price. In the morning, SHFE aluminum prices stagnated within narrowed ranges, with the SHFE current-month aluminum price struggling at RMB 16,800/mt. As goods holders were confident for the RMB 17,000/mt mark, spot premiums quickly rebounded to near RMB 200/mt over the SHFE current-month aluminum price. Stock building was seen during this last week before the National Day holiday. However, due to capital pressure at quarter’s end, purchases were only made for the small volumes of goods supplied at prices lower than the RMB 17,000/mt. Market transactions remained flat since goods holders were unwilling to move goods at lower prices. In the afternoon, after LME aluminum price plunge below the USD 2,200/mt mark, SHFE aluminum prices also plunged, leading to stronger bearish sentiment in the spot market. However, spot quotations held at RMB 17,000/mt as traders were unwilling to move goods due to limited supply. Inquiries from downstream and middlemen were hardly seen. The wait-and-see sentiment prevailed in the spot market.

SMM weekly average aluminum ingot price plunged RMB 295/mt or 1.66% to RMB 17,431/mt during the week from September 19th to 23rd.

Latest SMM survey shows 64% of market respondents are bearish towards aluminum prices this week. As global financial markets have entered the bear market territory, asset selling is speeding up. Aluminum prices, though supported by high cost, are also expected to slip as the shorts dominated the aluminum market. Meanwhile, downstream spot aluminum consumption remained weak due to contracted domestic demand and export volumes. Mounting capital pressure at quarter’s end also damped consumption recovery. Though stock building will start this last week before the National Day holiday, most downstream processors choose to reduce output on low order volumes. Aluminum consumption growth therefore will be limited and will not provide enough support for aluminum price to stay at existing levels.

Remaining 36% of market respondents expect little changes in aluminum prices this week. With a production cost near RMB 16,800/mt, spot aluminum price has already dropped below the RMB 17,000/mt mark, which limited downward space for aluminum prices. Meanwhile, spot inventories stayed low near the 300,000 mt level, SHFE aluminum stock also dropped below the 100,000 mt mark, which will support aluminum prices. Despite a prevailing bearish sentiment in financial markets, a further plunge in aluminum price is not likely to happen as stock building before the national holiday will help aluminum price stabilize.

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