SHANGHAI, Oct. 23 (SMM) – The SHFE 1212 aluminum contract opened lower at RMB 15,430/mt on Monday as LME aluminum prices plunged by 2% last Friday. Trading volumes were a mere 4,504 lots. The most active contract was resilient to declines compared with other base metals due to limited short selling, but met resistance at the 5-day moving average. Finally, the three-month contract shed RMB 60/mt or 0.39% to close at RMB 15,435/mt. Positions were up 144 lots to 57,470 lots. The most-traded contract fell back to levels seen early last week due to a lack of confidence and is expected to test support at RMB 15,400/mt in the short term.
Spot aluminum was mainly traded between RMB 15,280-15,310/mt in Shanghai on Monday, with discounts between RMB 60-90/mt. Low-iron aluminum was traded between RMB 15,350-15,370/mt. The most active SHFE aluminum contract proved resilient to declines compared with other base metals, but sluggish consumption in spot market dragged spot aluminum prices below RMB 15,300/mt again. Cargo holders were eager to move goods at lower prices at the month’s end, while downstream processors purchased as needed. In the afternoon, the SHFE 1212 aluminum contract slipped slightly. Wait-and-see sentiment dominated the spot market. Sparse quotations were seen at RMB 15,280-15,290/mt, but downstream producers showed little buying interest, leaving trading extremely quiet.
SMM’s statistics reveal that spot aluminum traded prices averaged RMB 15,290/mt in Shanghai on Monday against RMB 15,312/mt last week. According to SMM’s latest survey of 46 aluminum ingot traders, an overwhelming 57% expect aluminum prices to stay unchanged from Monday’s traded prices this coming week and the rest 43% believe aluminum prices will fall.
LME aluminum prices plunged by 2% last Friday, but remained above last week’s low of USD 1,946/mt, while SHFE 1212 aluminum contract prices stabilized above RMB 15,400/mt after the Chinese National Day holiday, both proving resilient to declines compared with other base metals. Short selling should be very limited despite the fact that LME and SHFE aluminum prices have little chance of rebounding. Neutral traders thus expect LME aluminum prices to move between USD 1,940-2,000/mt and the most active SHFE aluminum contract to fluctuate between RMB 15,400-15,480/mt and spot aluminum prices to struggle at RMB 15,300/mt in this coming week.
LME copper retreated below USD 8,000/mt, suggesting short selling is elevated. LME aluminum inventories exceeded 5 million mt and domestic aluminum stocks in trading markets also rose above 1 million mt. Global economic slowdown and sluggish consumption exacerbated inventory pressure. The chronic European debt crisis caused risk aversion to grow. Aluminum prices will fall along with other base metals. In this coming week, bearish traders believe LME aluminum should struggle at USD 1,950/mt, the most active SHFE aluminum prices will test support at RMB 15,300/mt and spot aluminum prices are expected to hit a fresh year’s low of RMB 15,200/mt.