SHANGHAI, Oct. 15 (SMM) - SHFE aluminum proved resilient to declines compared with LME aluminum, but the SHFE 1212 aluminum contract extended losses after the Chinese Mid-autumn Festival and National Day holidays, with prices falling below RMB 15,500/mt. The most active SHFE aluminum contract failed to rebound as longs took profits in the first half of last week, but returned above RMB 15,500/mt due to short-covering in the second half of last week. Resistance at the 5-day moving average, however, was still strong since longs were cautious towards buying. Total positions of the three-month SHFE aluminum contract have been decreasing for nearly one month, down from nearly 30,000 lots to the current 60,000 lots, indicating a lack of confidence by investors. Total positions of the 1301 aluminum contract were merely 48,000 lots. Hence, it will take some time before the 1301 aluminum contract can become the most active contract.
Arrivals of spot aluminum were normal during the 8-day Chinese holidays, with total inventories up by 96,000 mt and total trading inventories approaching 1 million mt. However, consumption failed to pick up post-holidays as downstream processors only purchased as needed, depriving spot aluminum prices of upward momentum. Last week, spot aluminum prices dropped along with SHFE aluminum. Spot discounts disappeared due to the upcoming delivery date of 1210 contracts. However, mainstream traded prices dropped from RMB 15,470/mt to RMB 15,360/mt as supply exceeded demand. Low buying interest from downstream producers and middlemen also depressed trading activity.
LME aluminum prices will hover near USD 2,000/mt, while the most active SHFE aluminum contract price will move around RMB 15,500/mt. Spot discounts will expand to RMB 50-100/mt as the SHFE 1211 aluminum contract will become the current-month contract on Tuesday. Trading should be light since downstream producers will purchase on an as-needed basis despite cargo holders’ willingness to move goods.