SMM Aluminum Price Forecast (Feb. 18-22)

SHANGHAI, Feb. 18 (SMM) – LME aluminum prices proved resilient in the week before the Chinese New Year holiday, but SHFE aluminum prices were vulnerable to losses. Struggles between longs and shorts in early week trading resulted in single-day trading volumes for SHFE 1305 aluminum contracts close to 20,000 lots. Weak market fundamentals and LME aluminum losses caused SHFE three-month aluminum prices to fall below RMB 15,300/mt to a low of RMB 15,175/mt. Quiet trading ahead of the Chinese New Year curbed upward momentum of SHFE 1305 aluminum contract prices, which struggled around RMB 15,200/mt.

Depressing SHFE aluminum prices sent spot aluminum prices down below RMB 14,900/mt, and even as low as RMB 14,800/mt, a new low for 2013. Strong bearish sentiment compelled traders to sell off inventories at lower prices, but sales were sluggish since both downstream producers and traders were closed for the holiday. The lowest quotation was reported at RMB 14,790/mt in Shanghai, RMB 14,760/mt in Hangzhou, and RMB 14,800/mt in Wuxi.  

In the post-holiday market, SHFE three-month aluminum prices will test support at RMB 15,100/mt, and since the first trading day after the holiday will be the last trading day of SHFE current-month aluminum prices, spot discounts should grow to over RMB 100/mt after shifting into a new current-month contract.