SHANGHAI, Nov. 8 (SMM) – The recent aluminum market has not seen any practical support. Though LME aluminum resisted downward pressures, which helped the most active SHFE aluminum contract 1201 open slightly higher at RMB 16,370/mt, the latter still closed RMB 55/mt or 0.34% lower at RMB 16,275/mt due to the prevailing bearish sentiment. Transactions volume dropped to less than 20,000 lots, which on the other hand limited losses of the contract. Positions of the contract decreased 148 lots to 74,954 lots. SMM expects the most active SHFE aluminum contract to struggle at RMB 16,300/mt in the short term as the market waits for a direction.
Traded prices of spot aluminum in Shanghai were between RMB 16,240-16,270/mt on November 7th, with discounts of RMB 20/mt to premiums of RMB 10/mt over the SHFE current-month aluminum price. In the morning, the SHFE current-month aluminum prices stagnated near RMB 16,250/mt, the downstream buying interest was quite low, with premiums over the SHFE current-month aluminum price being rarely seen in transactions. Though market supply remained sufficient, goods holders’ selling interest slightly weakened. Only a few aluminum brands for delivery were welcomed in the market. Transactions were sparse, however, as sellers and buyers diverged on prices. In the afternoon, the SHFE current-month aluminum price narrowly fluctuated below RMB 16,250/mt. The selling interest was low among traders. Quotations in the afternoon were between RMB 16,220-16,240/mt, wit zero discount or premium over the SHFE current-month aluminum price. Most buyers stood on the sidelines. Market transactions were quite limited.
The SMM weekly average aluminum ingot price for the week ended November 4th was RMB 16,294/mt, down RMB 182/mt or 1.1% from the previous week. In a latest SMM survey, though aluminum prices have been slipping for months and hit a new low last week, 40% of market respondents expect domestic aluminum prices to continue the slipping trend. They say that downstream demand remains weak, and will not see much improvement despite strong expectations of monetary easing in China. Meanwhile, the European debt crisis that has been continuously lifting up and pressing down investors’ confidence added to the bearish market sentiment. Even though most market players expect strong support at RMB 16,000/mt, they still expect a decline in this week’s aluminum prices. 52% of market respondents are neutral towards this week’s aluminum prices. They say aluminum producers can turn to the futures market to reduce losses, and purchasers will actively buy in at lower prices as production cost is high, therefore aluminum prices is not likely to slip this week. However, as the situation in Europe is far from optimistic, aluminum prices may not see any significant rebound either. The remaining 8% of market respondents expect domestic aluminum prices to climb this week. They say the downstream demand is stable, while the supply has slightly decreased. Supply and demand in specific regions is relatively balanced, which will lead to even lower selling interest of goods holders. With domestic stock markets warming up, aluminum prices are more likely to see a rebound, though the space for rebound is much limited.