SHANGHAI, Feb. 27 (SMM) -- The People’s Bank of China announced a cut in banks’ reserve requirement ratio, but this news failed to stimulate long investor buying interest in the SHFE aluminum market due to slow recovery of downstream consumption. Pessimism still dominated the market with spot discounts in excess of RMB 100/mt. SHFE aluminum prices only rose slightly and faced resistance at the 20-day moving average, with price gains less than those for LME aluminum prices.
Spot aluminum prices in Shanghai fluctuated between RMB 15,850-15,900/mt last week, but small gains in SHFE aluminum prices failed to boost spot aluminum prices. Spot aluminum prices met strong resistance at RMB 15,900/mt given growing aluminum inventories and sluggish downstream consumption, causing spot discounts to expand from RMB 100/mt, to more than RMB 150/mt. Market had a surplus in supply and transaction volumes were limited.
SMM predicts SHFE three-month aluminum contract prices will fluctuate narrowly around RMB 16,200/mt and trading activity will be quiet. Spot aluminum prices will face resistance at RMB 15,900/mt due to weak consumption and growing inventories. Speculative buying by middlemen will be limited, keeping spot discounts around RMB 150/mt.