SMM Daily Review - 2011/11/2 Aluminum Market

SHANGHAI, Nov. 3 (SMM) -- The most active SHFE 1201 aluminum contract gapped 2.2% lower at RMB 16,000/mt on November 2nd following an over 5.5% plunge in LME aluminum prices. The contract gradually trimmed losses, however, supported by short covering and bargain-hunting, and finally closed at RMB 16,285/mt, down RMB 75/mt or 0.46%. Positions of the contract increased 5,202 lots to 74,640 lots. The contract was supported by production cost at the RMB 16,000/mt mark, but also met strong resistance at RMB 16,300/mt.

Traded prices of spot aluminum in Shanghai were between RMB 16,180-16,220/mt on November 2nd, with premiums of RMB 10-40/mt over the SHFE current-month aluminum price.

In the morning, SHFE aluminum prices gapped lower and fluctuated near RMB 16,100/mt. Though some goods holders were unwilling to move goods at lower prices, spot premiums over the SHFE current-month aluminum price failed to expand due to low downstream buying interest. Spot aluminum was traded at a new yearly low during the day. However, only a few downstream buyers and middlemen replenished their stocks at lower prices and market transactions were quite limited.

In the afternoon, the SHFE current-month aluminum price broke through the RMB 16,200/mt mark with climbing Chinese stock prices. The selling interest turned quite low as most investors expect aluminum futures prices to rebound, and with stock replenishments at lower prices, spot aluminum prices climbed to RMB 16,200-16,250/mt as a result. Market transactions were quite limited though, due to tight supply.