SMM Aluminum Price Forecast (Mar. 5-9)

SHANGHAI, Mar. 5 (SMM) -- Although LME aluminum prices were high, SHFE three-month aluminum contract prices remained weak near RMB 16,250/mt, causing the SHFE/LME aluminum price ratio to fall below 7. Spot aluminum prices in Shanghai fluctuated last week between RMB 15,870-15,920/mt, up RMB 20/mt from the previous week, but actual consumption remained sluggish and only middlemen were actively purchasing. Strengthening domestic stock markets helped boost market sentiment, so some cargo-holders became less willing to sell at lower prices, helping limit supply and preventing spot aluminum prices from falling as SHFE aluminum prices fell. Spot discounts narrowed from RMB 150/mt, to RMB 100/mt, but overall trading activity was limited.

SMM predicts SHFE three-month aluminum contract prices will find support at RMB 16,200/mt, but weak consumption and strong short selling pressures will create strong resistance at RMB 16,300/mt. In spot markets, although consumption remains weak, spot discounts will narrow gradually to below RMB 100/mt as markets expect the Chinese economy to recover and as the delivery date nears. In this context, spot aluminum prices are expected to remain above RMB 15,900/mt, but will lack further upward momentum to push above RMB 15,950/mt.