SMM Aluminum Market Daily Review (2012-10-15)

SHANGHAI, Oct. 16 (SMM) - The SHFE 1212 aluminum contract opened lower at RMB 15,425/mt on Monday. The most active contract briefly touched a high of RMB 15,480/mt, but later hovered around RMB 15,450/mt and met strong resistance at the 60-day moving average as shorts and longs exited the market after profit-taking. Finally, the three-month contract shed RMB 25/mt or 0.16% to close at RMB 15,460/mt. Positions were down 924 lots to 59,722 lots. The Chinese economy has yet to hit bottom, dampening market confidence. The domestic stock market and futures market fell as a result. The most-traded contract is expected to find very weak support at RMB 15,400/mt in the short term.

Spot aluminum was mainly traded between RMB 15280-15300/mt in Shanghai on Monday, with premiums between RMB 0-20/mt. Low-iron aluminum was traded between RMB 15350-15360/mt. The SHFE aluminum contract extended losses, dragging spot aluminum prices in east China below RMB 15,300/mt, near the lowest for the year. Most downstream buyers stood on the sidelines at the beginning of the week, while cargo holders were unwilling to move goods at discounts even on the last trading day of the 1210 contract, leaving trading quiet. In the afternoon, the current-month contract was mired, depressing trading activity in spot market. Sparse quotations were seen at RMB 15,280/mt. Since inquiries were rarely heard, overall trading was quiet.  

SMM’s statistics reveal that spot aluminum traded prices averaged at RMB 15,396/mt in Shanghai last week. Aluminum prices were generally pressured under RMB 15,300/mt on Monday, nearly the lowest for the year. SMM’s latest survey of 39 aluminum ingot traders shows that 49% believe aluminum prices will fall this coming week. Domestic aluminum inventories in trading markets approached 1 million mt after the Chinese Mid-autumn Festival and National Day holidays, while downstream consumption failed to pick up in traditional high-demand period. With the Chinese economy slowing and aluminum prices falling after-holidays, there is little chance of consumption recovering in 4Q. In the context, bearish traders expect aluminum prices to fall to test support at RMB 15,200/mt this coming week, but the fall should be limited. 

38% are neutral towards this week’s aluminum prices as positive exports data for September will give a boost to spot aluminum consumption. Aluminum prices are expected to stabilize around RMB 15,300/mt after days of drop.

With China’s 3Q GDP coming up soon, market expectations are growing that the central government will introduce fresh stimulus measures and that the People’s Bank of China will launch monetary policy easing amid economic slowdown. The rest 13% predict aluminum prices will rise this week, but should meet resistance at RMB 15,400/mt.