SMM Aluminum Market Daily Review (2013-3-18)

SHANGHAI, Mar. 19 (SMM) – SHFE 1306 aluminum contract prices gapped lower at RMB 14,780/mt on March 18. Cyprus will impose tax on current bank deposits, triggering market panic. As a result, the most active SHFE aluminum contract dived to RMB 14,595/mt in early morning session, down as much as 1.65%. Finally, SHFE aluminum for June delivery shed RMB 155/mt or 1.04% to close at RMB 14,685/mt. Positions decreased 884 lots to 99,342 lots. The European debt crisis has once again hampered global economic recovery and sluggish aluminum consumption in China has further aggravated oversupply. In this context, the most-traded SHFE aluminum contract should meet growing resistance at RMB 14,700/mt for the near term. 

Spot aluminum was mainly traded at RMB 14,470-14,500/mt in Shanghai on Monday, a discount of RMB 70-100/mt over SHFE current-month aluminum contract prices. Low-iron aluminum was trade around RMB 14,650/mt. SHFE 1306 aluminum contract prices plunged along with other base metals. Some traders in spot markets held back goods at low prices, helping aluminum prices resist declines, with strong resistance felt at RMB 14,500/mt, though. Downstream producers purchased as needed, while middlemen similarly showed moderate buying interest, depressing overall trading. In the afternoon, prices of the most active SHFE aluminum contracts expanded losses, leaving traders anxious to move goods, with offers down to RMB 14,430/mt from RMB 14,460/mt. Downstream producers and middlemen refrained from buying out of bearishness over future prices. 

SMM aluminum price averaged RMB 14,480/mt on Monday, down from last week’s RMB 14,530/mt. Aluminum prices fell back following the State Reserve Bureau (SRB)’s aluminum ingot purchase. A majority of the 38 domestic aluminum ingot traders and producers surveyed by SMM note no reason for optimism over aluminum prices. This is because news on SRB’s aluminum ingot buying has been digested and consumption remains sluggish. However, looking on the bright side, those aluminum smelters winning bids from the SRB will hold back some stocks for delivery, causing future inventories to increase at a slower pace. In addition, downstream consumption will begin to gradually recover, helping spot aluminum prices resist declines, as has been reflected in the smaller decline in spot aluminum prices when SHFE aluminum prices tumbled on Monday. As such, 53% of market players expect spot aluminum prices to hover around RMB 14,500/mt this week.

The remaining 47% of market players are bearish towards aluminum prices this week for the following reasons. First, worries over the European debt crisis have resurfaced. Second, economic indicators from China and the US were mixed. Third, slow economic recovery and limited consumption growth have caused aluminum prices to give back gains, with the low-end prices of both LME and SHFE aluminum down. In this context, spot aluminum prices are expected to slide to RMB 14,400/mt, with thin trading activity.