SHANGHAI, May 8 (SMM) – Due to weakness in the macro economy, the most active SHFE aluminum contract for August delivery closed down RMB 50/mt or 0.31% at RMB 16,275/mt on Monday. Positions added 1,696 lots to 76,178 lots. Financial markets remained relatively negative. The hike of bauxite exports duties to 20% has already influenced aluminum price performance, which lacks momentum to rise further. Strengthening shorts will force longs to close their positions and the most active SHFE aluminum contract is expected to test support at RMB 16,200/mt.
Shanghai spot aluminum was sold at RMB 16,130-16,160/mt, at discounts of RMB 20/mt to premiums of RMB 10/mt. Wuxi spot aluminum was sold at RMB 16,150-16,170/mt. Hangzhou spot aluminum was sold at RMB 16,120-16,160/mt. The SHFE current-month aluminum contract showed resilience and consolidated at the 5-day moving average. The bullish sentiment strong was strong in the spot market, most traders narrowed discounts and small premiums were even seen for some aluminum ingot brands due to tight supply. But as downstream processing enterprises mostly stood on the sidelines early in the week, their willingness to buy was limited. Most deals were done at the low end. The overall atmosphere is dull.
This week’s SMM research covered 40 aluminum traders. 10 are optimistic, 23 are neutral and 7 are pessimistic.
This week 10 traders are bullish, accounting for 25% of all respondents. They said aluminum prices may still edge higher, as on the one hand Indonesia’s higher bauxite export duties increased costs at domestic alumina producers, which will be transmitted to aluminum prices. There will also be market speculation to push up aluminum prices. The current month SHFE contract showed resistance for loss and, under external negative news, still found support at the 60-day moving average. That indicates spot aluminum may still be able to touch RMB 16,200/mt in the short term.
There are 23 traders who see flat performance, accounting for 57% of all traders. They said, although aluminum prices slightly rose recently, especially after the May Day holiday when spot aluminum price rose near RMB 100/mt, higher aluminum prices failed to led downstream consumption higher. Consequently, aluminum lacked upward momentum and met deadlock. Pressure comes from weak consumption and higher alumina prices, which will cause large ups and downs in aluminum prices. SHFE aluminum prices are fluctuating narrowly due to speculation activities and a negative environment. The current-month contract is moving in RMB 16,100-16,200/mt. The most active contract is near RMB 16,300/mt.
There are 7 bearish traders, accounting for 18% of all respondents. They said recently more uncertain factors appeared, especially that euro zone manufacturing data and its overall debt status are not optimistic, which dragged down LME aluminum prices. Under impact from LME aluminum, SHFE aluminum prices will inevitably slip. On the fundamentals, high stocks and weak demand in the conventionally peak period will drag lower spot aluminum prices. Last week’s average aluminum price of RMB 16,140/mt is hard to counter so many negative news. For the short term, spot aluminum may return below and stagnate under RMB 16,100/mt.