SMM Aluminum Price Forecast (2013-1-14)

SHANGHAI, Jan. 14 (SMM) – Despite inspiring economic indicators in China, SHFE aluminum prices failed to follow LME aluminum prices up last week on sluggish consumption and no news of the State Reserve Bureau’s aluminum ingot purchase. SHFE 1303 aluminum contract prices met resistance at the 5-day moving average, but still found strong support at RMB 15,240/mt as longs and shorts stood on the sidelines. Prices for the most active SHFE aluminum contract rebounded slightly later in the week, but resistance was still strong at RMB 15,300/mt since longs were wary of buying at higher prices.

Domestic spot aluminum inventories exceeded 40,000 mt during the New Year holiday, which caused total inventories to grow to nearly 890,000 mt. Arrivals were limited due to transportation problems, and downstream processors were purchasing as needed after the New Year holiday. As a result, aluminum stocks which had built up during the holiday were sold up last week, helping spot aluminum prices resist declines. SMM aluminum prices averaged RMB 15,040-15,060/mt, and cargo holders held prices firm, taking a strong wait-and-see stance at the beginning of the year and causing spot discounts to fall to zero before delivery of SHFE current-month aluminum contracts. Traders were anxious to move goods since prices were flat with current-month contracts. Later, traded prices fell from RMB 15,070/mt early last week to RMB 15,030/mt as supply grew while consumption remained stable. Overall trading was up.

In this coming week, LME aluminum prices will struggle at USD 2,100/mt and SHFE 1303 aluminum contract prices will hover around RMB 15,200/mt. SMM aluminum price should stagnate at RMB 15,050/mt, with spot discounts returning to above RMB 50/mt after SHFE 1302 aluminum contracts become the current-month contract. Overall trading should be stable.