SMM Aluminum Market Daily Review (2012-12-31)

SHANGHAI, Jan. 4 (SMM) – SHFE 1303 aluminum contract prices opened at RMB 15,305/mt on December 31. China’s manufacturing PMI for December was positive, sending prices of the most active SHFE aluminum contract up, but gains were limited as longs were cautious towards buying at higher prices. The March aluminum on the SHFE only touched a high of RMB 15,365/mt and finally closed at an intraday high of RMB 15,365/mt, up RMB 40/mt or 0.26%. Positions were up 134 lots to 65,124 lots. Investors turned away from the market on the last trading day of 2012 as positive Chinese economic data was offset by worries over the fiscal cliff talks in the US. SHFE market will resume trading today and whether the most active SHFE aluminum contract will meet resistance or find support at RMB 15,300/mt depends on how LME aluminum moves.

Spot aluminum was mainly traded at RMB 15,070-15,080/mt in Shanghai on December 31, with discounts between RMB 50-60/mt. Low-iron aluminum was traded at RMB 15,110-15,130/mt. HSBC’s China manufacturing PMI for December was upbeat, helping SHFE 1303 aluminum contract prices rebound mildly. Cargo holders refrained from selling, while downstream producers seldom entered the market, with only middlemen purchasing limited amounts. Sparse quotations were seen firm at RMB 15,070/mt and overall trading was quiet.

SMM statistics show that SMM aluminum prices averaged RMB 15,060/mt on Monday against last week’s RMB 15,042/mt. 

According to SMM’s survey of 32 domestic aluminum ingot traders and producers, almost half of the surveyed market players expect aluminum prices to hover around RMB 15,050/mt after the New Year holiday, without market direction in the near term.

31% of market players believe aluminum prices will likely break through RMB 15,100/mt post-holidays and LME aluminum prices will challenge resistance at USD 2,100/mt since they are expecting the State Reserve Bureau to conduct the next round of aluminum ingot purchase in January.

47% of market players hold the view that aluminum prices will stall at RMB 15,050/mt and show some resilience and that SHFE 1303 aluminum contract prices will consolidate support at RMB 15,300/mt. China’s economic indicators have been positive recently and market is optimistic towards outlook for 2013. Besides, demand is likely to pick up in the new year. However, uncertainty still exists surrounding whether the US economy will recover or shrink in 2013. Aluminum ingot inventories were on the rise during the New Year’s and it remains to be seen whether consumption will rebound post-holidays. 

The remaining 22% understand that high inventories post-holiday will send aluminum prices down to RMB 15,000/mt again, LME aluminum should lose support at USD 1,950/mt and that SHFE 1303 aluminum contract prices are expected to meet resistance at RMB 15,300/mt.