SHANGHAI, Jan. 8 (SMM) – SHFE 1303 aluminum contract prices opened lower at RMB 15,310/mt on January 7. Trading activity was muted, with trading volumes a mere over 5,000 lots. The contract hovered near RMB 15,300/mt in the morning, but retreated below the mark in the afternoon due to sell-off. Finally, the March aluminum on the SHFE ended the day down RMB 85/mt or 0.55% at an intraday low of RMB 15,265/mt. Positions were up 48 lots to 65,636 lots. SHFE aluminum prices drifted lower after a low opening due to falling LME aluminum prices, but still showed some resilience because of expectations for the State Reserve Bureau to buy aluminum ingot again. The most active SHFE aluminum contract is expected to struggle at RMB 15,300/mt in the short term.
Spot aluminum was mainly traded at RMB 15,050-15,070/mt in Shanghai on Monday, with discounts at RMB 30-50/mt. Low-iron aluminum was traded at RMB 15,100-15,120/mt. SHFE 1303 aluminum contract prices edged down, sending spot aluminum prices down as well. Cargo holders still held back goods after the New Year holiday, helping aluminum prices stay firm at RMB 15,050/mt, resilient compared with SHFE aluminum prices. Downstream producers and middlemen replenished some stocks, improving overall trading slightly. In the afternoon, prices of the most active SHFE aluminum contracts expanded losses. Traders still refrained from selling to hold offers firm at above RMB 15,050/mt. Middlemen purchased limited amounts at lows and overall trading was light.
SMM statistics show that SMM aluminum prices averaged RMB 15,050/mt on Monday, compared with last week’s RMB 15,060/mt. Aluminum prices were stable both before and after the New Year holiday. According to SMM’s survey of 31 domestic aluminum ingot traders and producers, most of the surveyed market players expect aluminum prices to hover around RMB 15,050/mt this week.
An overwhelming majority of 58% market players understand that worries that QE3 may end in advance caused LME aluminum prices to drop recently, and this will weigh on SHFE aluminum prices. Nevertheless, expectations are running high that the State Reserve Bureau (SRB) will buy aluminum ingot again in January, helping SHFE aluminum prices resist declines. Besides, cargo holders are in no hurry to move goods at the start of the month, which will limit the downside space of aluminum prices. Hence, these neutral market players expect LME aluminum prices to struggle at USD 2,050/mt, SHFE 1303 aluminum contract prices to move around RMB 15,300/mt and spot aluminum prices to hover around RMB 15,050/mt, with trading up slightly.
19% of market players are bullish towards this week’s aluminum prices for the following reasons. First, there is possibility that the SRB will conduct the next round of aluminum ingot in January. Second, downstream producers will begin to stockpile aluminum ingot as the Chinese New Year holiday is approaching. Third, aluminum smelters will hold offers firm at the start of the year, which will help SHFE aluminum prices rebound mildly. These bullish market players thus believe that LME aluminum prices will return above USD 2,050/mt, SHFE 1303 aluminum contract prices should regain RMB 15,300/mt and spot aluminum prices will test resistance at RMB 15,100/mt, with trading up.
The remaining 23% hold the view that sharply falling LME aluminum prices will send SHFE aluminum prices down. Aluminum inventories in trading markets are growing, but downstream producers have not yet begun to restock aluminum, unfavorable for aluminum prices. Since the possibility of SRB aluminum ingot buying still exists, downside space should be limited. In this context, these bearish market players anticipate that LME aluminum should meet resistance at USD 2,050/mt, SHFE 1303 aluminum contract prices will test support at RMB 15,200/mt and spot aluminum prices will likely retreat from RMB 15,000/mt, with trading modest.