SHANGHAI, Jun. 19 (SMM) – The most active SHFE aluminum contract for September delivery opened slightly higher at RMB 15,885/mt, shortly hit RMB 15,900/mt and trended downward. Its losses accelerated in the afternoon to finally settle at its low of RMB 15,800/mt, down RMB 65/mt or 0.41%. Positions dropped 244 lots to 100,346 lots. Rumors about preferential power rates ignited bearishness in the aluminum market, pressuring on aluminum prices. The most active contract is expected to see even weaker support at RMB 15,800/mt.
Spot aluminum was traded at RMB 15,870-15,890/mt in Shanghai, with low-iron aluminum trading at RMB 15,950-15,970/mt. Greece’s euro exit risks have dropped considerably but debt worries stay. Metals prices started higher and narrowed gains. SHFE aluminum’s rebound was restrained by LME aluminum performance. The current-month contract was still pressured at the RMB 15,900/mt mark. Spot aluminum consumption was sluggish, with downstream continuing to purchase as-needed. The selling interest was high, helping mainstream traded prices stabilize. Prices in Wuxi and Hangzhou had hit RMB 15,900/mt but traded volumes were flat. Purchases in the afternoon were hardly seen while goods were easy to find. Only a few deals were done at RMB 15,870/mt. The overall market sentiment was bearish.
SMM statistics show the average traded price of spot aluminum in Shanghai was RMB 15,887/mt last week, down RMB 28/mt from a week earlier. SMM contacted 29 traders on this week’s aluminum prices, with 2 bullish, 18 neutral and 9 bearish.
The 2 bullish traders said Greece now is able to take measures to contain its debt woes, which will boost the euro and create space for LME aluminum to rebound. LME aluminum prices already slipped to USD 1,926/mt, a 2012 low, which should be followed by a correction. In China, supportive policies have already been responded with improving property sales. SHFE aluminum is likely to rebound supported by LME aluminum performance. After a shift in the current-month contract, spot aluminum prices may climb to a possible high of RMB 15,950/mt. Spot prices will only see discounts within RMB 10/mt.
The 18 traders with neutral views said Greece is but one source of worry in the euro zone, and Spain and Italy will continue to unnerve investors. That is also the reason why the euro only saw a slight rebound against the US dollar after the Greek election ended with positive results. The US dollar index has stayed at high levels. Though investors again and again expected QE3, the US has delivered somewhat stable measures to help the US dollar index stay near 82 and pressure LME aluminum prices to new lows of the year. SHFE aluminum prices, though showed resistance to losses, were still soft. However, production losses and traders as well as producers will also help prices stabilize. These traders expect aluminum prices of RMB 15,850-15,900/mt for this week.
The 9 bearish traders said before the European debt crisis has a clear aid plan, any rebound space will be limited. In addition, the US has been continually pressing down QE3, with the US dollar index climbing nonstop and commodities prices being pressured. LME aluminum prices already hit last week USD 1,926/mt, a new low of the year, and may shed further losses as support has been fragile. SHFE aluminum prices plunged at the tail of trading last Monday, with all moving averages trending downward and the bottom is still hard to spot. Power rate cuts in Henan and Guangxi, as well as other regions, if are finally realized, will add pressure on supply, while lower power rates, which means lower production costs, will also weigh on prices. These traders expect aluminum prices to dip to RMB 15,800-15,850/mt this week.