SMM Daily Review - 2012/3/12 Aluminum Market

SHANGHAI, Mar. 13 (SMM) – Following gains of LME aluminum last Friday, the most active SHFE aluminum contract for May delivery hit RMB 16,235/mt in Monday morning, but failed to consolidate thereby closing down RMB 20/mt or 0.12% at RMB 16,175/mt. Positions stayed at 51,502 lots while only 5,148 lots of contracts were transactions. Weak fundamentals means the metal will not likely present one-sided movement in the near term.

Spot aluminum traded between RMB 15,920-15,940/mt in Shanghai, at smaller discounts of RMB 20-40/mt over the SHFE current-month aluminum price as delivery date nears. Low-iron aluminum traded between RMB 16,000-16,020/mt. Scarce inquires and deals were reported, however, from bearish middlemen and downstream buyers.

In an SMM survey on this week’s aluminum prices, 3 or 8% of the 38 aluminum traders covered say aluminum price will gain as demand recovers in March and with the rebound of LME aluminum prices after the European debt crisis slightly eased. Narrowing discounts over the SHFE current-month aluminum price with the nearing delivery date also means higher aluminum prices.

The majority 30 or 79% respondents expect stability though, while high production costs limit downward space and warrant hedging of aluminum plants prevents large gains. In addition, high aluminum stocks have added to upward resistance. Remaining 5 or 13% traders expect losses based on recent stagnation and light trading of SHFE aluminum while aluminum stocks keep going up in the face of weak demand outlook.