SMM Daily Review - 2011/10/12 Aluminum Market

SHANGHAI, Oct. 13 (SMM) – The most active SHFE 1112 aluminum contract opened lower at RMB 16,650/mt on October 12th. Following a strong rebound in Shanghai Composite Index, the contract consolidated at the 5-day moving average, but narrowly fluctuated near RMB 16,740/mt later due to sluggish transactions. The contract finally closed at RMB 16,745/mt, up RMB 5/mt or 0.03% from previous trading day. Positions of the contract decreased 1,346 lots to 97,144 lots. SMM expects the contract to meet strong resistance at RMB 16,800/mt due to inadequate market confidence.

Traded prices of spot aluminum in Shanghai were between RMB 16,980-17,000/mt on October 12th, with premiums of RMB 20-40/mt over the SHFE current-month aluminum price.

The US passed a currency bill to force appreciation of Chinese currency, which will significantly impact domestic export. Meanwhile, the rebound of SHFE aluminum prices also ended today, adding to the wait-and-see sentiment in the market. As a result, both inquiries and purchases were rarely seen in the spot market, with spot aluminum price dropping below the RMB 17,000/mt mark. Goods holders were unwilling to lower their quotations after this drop, with only a few transactions being reported. This is also the worst trading day in the spot aluminum market following previous holiday.

The SHFE current-month aluminum price climbed in the afternoon to test RMB 17,000/mt with profit-taking by the shorts, but the spot market remained quiet. The few quotations also stayed in the RMB 16,980-17,000/mt range. Transactions were rarely seen.