SHANGHAI, Dec. 19 (SMM) -- SHFE three-month aluminum contract prices plummeted, erasing previous gains driven up by higher electricity prices. The Shanghai Composite Index fell sharply, increasing market pessimism, and in response, SHFE three-month aluminum contract prices fell to RMB 15,600/mt. Contract prices later made small gains from some long buying, but with prices still struggling at RMB 15,700/mt. Downstream aluminum processors still have showed little buying interest so far in December due to severe year-end cash flow pressures, falling orders, and strong market pessimism. Cargo-holders showed strong interest in selling goods at a premium before the delivery date, but even as aluminum prices have fallen to near RMB 15,800/mt, market buying interest remained low, keeping overall trading activity quiet.

SMM predicts SHFE three-month aluminum contract prices will move below the 5-day moving average, hovering between RMB 15,600-15,800/mt. In the spot aluminum market, increasing supply and sluggish demand will limit spot premiums, which are expected between negative RMB 40/mt and positive RMB 10/mt over SHFE current-month aluminum contract prices. Market transactions should be limited.