SMM Daily Review - 2012/2/27 Aluminum Market

SHANGHAI, Feb. 28 (SMM) – Despite a surge in LME aluminum prices last Friday, the most active SHFE three-month aluminum contract opened only slightly higher at RMB 16,250/mt and closed up RMB 60/mt or 0.37% at RMB 16,255/mt. The highest price hit in the day is RMB 16,280. SMM expects the contract to struggle near RMB 16,250/mt in the near term due to weak demand.

Spot aluminum traded between RMB 15,890-15,920/mt in Shanghai, at discounts of RMB 130-160/mt over the SHFE current-month aluminum price. SHFE aluminum fails to keep up with the pace of LME aluminum, which consequently contributed only slight gains in spot prices. A even weaker demand at month’s end means spot discounts over the SHFE current-month aluminum price may expand further. Spot aluminum ingots previously traded at discounts over Shanghai spot prices in Wuxi were traded almost equally with the latter, though deals were limited.

In an SMM survey on this week’s aluminum prices, 30% market players are optimistic, compared with 5% in the previous week, saying slight gains are achievable despite slow recovery of downstream demand. Their optimism comes from climbing crude and copper prices while expecting also strong resistance at RMB 16,000/mt. 68% respondents said aluminum prices will stay little changed this week as improvement in the macroeconomic side and weak fundamentals will come to a draw. Remaining 2% respondents are pessimistic, expecting downside pressure at RMB 15,900/mt due to tight cash flow at month’s end and staying weak demand.