SHANGHAI, Apr. 23 (SMM) – The most active SHFE aluminum contract for July delivery gapped lower last Monday and failed to completely recover in the face of strong resistance at RMB 16,100/mt. The contract hit a low of RMB 16,030/mt and is expected to test support at RMB 16,000/mt in the near term.
Spot aluminum prices tracked SHFE aluminum on Monday and fell to a low of RMB 15,920/mt, but later returned to near RMB 16,000/mt backed by gains in the Shanghai Composite Index and low selling interest at low-end prices. The rebound ran out of steam at the RMB 16,000/mt mark, however, on weak demand and a poor future outlook.
Investor risk appetite has weakened as Spanish government debt issues emerge and due to continued economic weakness in the US and China and hard-to-predict monetary easing. Risk aversion, however, will help the US dollar index stabilize near 79.5, if not strengthen further, but keep aluminum prices in a narrow band.
The price range for LME aluminum in the coming week should be between USD 2,020-2,100/mt, and the most actively traded SHFE aluminum contract will likely hover between RMB 16,000-16,150/mt. Spot aluminum prices still lack momentum to break through RMB 16,000/mt, and should trade at discounts of RMB 10/mt to premiums of RMB 30/mt over the current-month SHFE aluminum contract. Trading volumes will not improve as downstream enterprises continue to purchase on an as-needed basis.