SMM Daily Review - 2012/4/16 Aluminum Market

SHANGHAI, Apr. 17 (SMM) – The most active SHFE aluminum contract for July delivery gapped lower at RMB 16,080/mt on Monday, following a plunge in LME aluminum prices on Friday. Transactions broke through 20,000 lots to a record high while positions surged over 10,000 lots to 61,300 lots. The majority of trading was contributed by shorts, dragging the contract RMB 120/mt or 0.74% lower to settle at RMB 16,050/mt. The downward run may continue given weakness in the global economy, despite reduced supply on account of inverted prices and costs. SMM expects the contract to test support at the RMB 16,000/mt mark in the near term.

Spot aluminum traded between RMB 15,920-15,950/mt in Shanghai, at premiums of RMB 0-30/mt over the current-month aluminum contract which is to be delivered today. While the majority of traders were open to deals with premiums, a few held goods back. Buying turned relatively active when premiums dropped to near none, leading to a slight uptick in traded volume.

In an SMM survey on this week’s aluminum prices, only 1 of the 38 traders covered says aluminum will strengthen this week supported to increased output cuts at smelters running at loss. 24 (63%) traders are neutral to the light metal, citing stability contributed by high production costs and weak demand. Remaining 13 (34%) traders are pessimistic, saying stability in aluminum won’t last and high stocks will fail any upward attempt.