SMM Daily Review - 2012/2/20 Aluminum Market

SHANGHAI, Feb. 21 (SMM) – The most active SHFE three-month aluminum contract opened higher at RMB 16,210/mt on Monday supported by a reserve ratio cut from China’s central bank on Saturday. In the face of both domestic and overseas pressures, the contract failed to retain gains, however, and closed down RMB 45/mt or 0.28% at RMB 16,135/mt despite a slight rebound. Both longs and shorts are cautious since uncertainties in the macroeconomic side still exist. Only 7,968 contracts were transacted and total positions dropped by 1,360 lots to 59,138 lots. The intraday average’s drop to below the 30-day moving average last Friday also means low possibility that aluminum price will rebound in the near term.

Spot aluminum traded between RMB 15,860-15,900/mt, at discounts of RMB 100-130/mt over the SHFE current-month aluminum price in Shanghai on Monday. Low-iron aluminum traded between RMB 15,970-16,000/mt, with discounts over the SHFE current-month aluminum price rarely changed. The SHFE current-month aluminum contract’s failure to hold at RMB 16,000/mt after a return above the level and weak downstream demand have led to strong short selling interest, keep spot discounts above RMB 100/mt. Except active bargain hunting by a few middlemen, overall trading stayed light in the face of supply sufficiency.

In a February 20 SMM survey on this week’s aluminum prices, 2 (5%) of the 38 spot aluminum traders covered said aluminum price will gain, mainly supported by satisfactory recoveries in local  demand. 26 (69%) respondents expect stability as the result of a draw between longs and shorts. Remaining 10 (26%) traders, however, hold pessimistic views in light of still weak downstream demand and continually climbing stocks.