SHANGHAI, Feb. 1 (SMM) – The most active SHFE three-month aluminum contract opened lower and closed down RMB 60/mt or 0.37% at RMB 16,305/mt on Tuesday. Though transactions dropped to less than 10,000 lots, shorts still dominated the market, with their positions adding another 1,338 lots before hitting 59,280 lots. Stronger selling off was seen during the day as downstream aluminum processors still have not fully resumed operation and in the face of over RMB 100/mt of discounts over the SHFE current-month aluminum price. SMM expects the contract to drop to RMB 16,200/mt in the near term given weak support at the 10-day moving average.

Mainstream traded prices of spot aluminum were between RMB 15,950-15,990/mt in Shanghai, with discounts of RMB 120-150/mt over the SHFE current-month aluminum contract. In East China, weak downstream demand led to continuous goods movements at high discounts and transactions were mainly arbitrage. Remaining strong short selling has eroded SHFE aluminum’s rebound momentum and bearish fundamentals have been building stronger resistance at the RMB 16,000/mt mark. Aluminum stocks surged to near 180,000 mt in South China following the Chinese New Year. Despite weak SHFE aluminum prices and light downstream demand, local goods holders kept quotations above RMB 16,000/mt. Mainstream traded aluminum prices in South China were between RMB 15,980-16,020/mt during the day. The overall traded volume was light as the wait-and-see sentiment prevailed.