SHANGHAI, Jan. 29 (SMM) – SHFE 1303 aluminum contract prices opened at RMB 15,115/mt on January 28. The most active contract lost support at RMB 15,100/mt and remained at low levels in the afternoon. Finally, the March aluminum closed down RMB 55/mt or 0.36% at RMB 15,075/mt. Positions were down 254 lots to 54,122 lots. SHFE 1304 aluminum contracts may become the most active one today. Weak fundamentals depressed trading activity. The most-traded SHFE aluminum contracts should extend losses and fall to RMB 15,100/mt at the bottom in the short term.
Spot aluminum was mainly traded at RMB 14,900-14,910/mt in Shanghai on Monday, with discounts at RMB 90-100/mt. Low-iron aluminum was traded around RMB 15,000/mt. SHFE current-month aluminum contracts lost support at RMB 15,000/mt. Cargo holders stood on the sidelines, holding offers firm at RMB 14,900/mt. Downstream producers showed little buying interest, while middlemen were buying modest amounts at bottom prices. In the afternoon, prices of the most active SHFE aluminum contracts moved at low levels. Spot aluminum prices continued to edge down, with some offers down to RMB 14,890/mt. Overall trading was muted.
SMM data shows that SMM aluminum price averaged RMB 14,900/mt on Monday, down from last week’s RMB 14,946/mt. Most of the 34 domestic aluminum ingot traders and producers surveyed by SMM expect aluminum prices to fall slightly due to weak fundamentals.
53% of market players are bearish towards this week’s aluminum prices. Some even lowered offers to RMB 14,890/mt yesterday afternoon. LME aluminum prices frequently fell back after hitting high as investors were hesitant. LME aluminum prices were under downward pressure, causing SHFE aluminum to extend losses. SHFE current-month aluminum contracts failed to regain RMB 15,000/mt on Monday, turning markets more bearish. Downstream producers have mostly closed as Chinese New Year nears, causing inventories to grow, and thus depressing trading activity in spot markets. However, shorts will be limited ahead of Chinese New Year, so the downside space of aluminum prices should be limited. Bearish market players anticipate that aluminum prices will dip to a low of RMB 14,850/mt at the bottom.
The remaining 47% expect SMM aluminum price to fluctuate in the band of RMB 14,900-14,950/mt. These neutral market players understand that although LME aluminum are hovering around USD 2,050/mt and SHFE aluminum prices are under downward pressure, bullish Shanghai Composite Index should help aluminum prices stabilize at the bottom. Both longs and shorts will exit the market due to the upcoming Chinese New Year, and this will also help aluminum prices resist declines. Traders will take a wait-and-see stance and hold offers firm at RMB 14,900/mt despite dwindling downstream demand. Aluminum prices will meet strong resistance at above RMB 14,950/mt, though.