SMM Aluminum Market Daily Review (2013-4-8)

SHANGHAI, Apr. 9 (SMM) – SHFE 1306 aluminum contract found its low at RMB 14,555/mt after starting the day slightly higher at RMB 14,570/mt on Monday. In the afternoon, the most active aluminum contract broke through resistance at RMB 14,600/mt on short-covering, and finally closed at an intraday high of RMB 14,650/mt, up RMB 95/mt or 0.65%. Positions shrank 1,514 lots to 88,878 lots. Longs are cautious about buying, so SHFE aluminum for June delivery is expected to test support at RMB 14,600/mt.

Spot aluminum was traded at RMB 14,420-14,440/mt in Shanghai on Monday, a discount of RMB 50-80/mt over SHFE 1304 aluminum contract prices. Low-iron aluminum was trade at RMB 14,580-14,600/mt. The low-end price of SHFE 1306 aluminum contract was resilient, promoting downstream producers to restock after the three-day public holiday. Similarly, traders were active moving goods, pushing transaction volumes up slightly. In the afternoon, prices of the most active SHFE aluminum contracts staged a strong rally, triggering wait-and-see sentiment in spot markets. Sparse quotations were reported at RMB 14,440-14,450/mt and overall trading was muted.
 
SMM aluminum price averaged RMB 14,430/mt on Monday, slightly higher than last week’s RMB 14,423/mt. A majority of the 39 aluminum ingot traders and producers surveyed by SMM believe aluminum prices will stabilize or rebound slightly this week.

38% of market players are confident that aluminum prices will likely break through RMB 14,450/mt this week for three reasons. First, downbeat US employment data mean the US Federal Reserve will continue to keep its QE3 in place. Second, a softer US dollar will help commodity prices rebound. Third, LME aluminum tried to regain USD 1,900/mt on Monday, which will offer some upward momentum to aluminum prices in China. As such, SHFE 1306 aluminum contract will test resistance at RMB 14,700/mt. In spot aluminum market, growing hopes for consumption growth and slowing inventory growth will help push spot aluminum up to RMB 14,450/mt. Overall trading will gradually pick up.  

The remaining 62% of market players expect aluminum prices to hover between RMB 14,400-14,450/mt this week for two reasons. First, although LME and SHFE aluminum has rebounded, the rally is due mainly to short-covering. Long buying is limited. Second, growing inflationary pressure and declining industrial profits in China will keep aluminum prices in check. In this context, LME aluminum will meet resistance at USD 1,900/mt, while prices for the most active SHFE aluminum contracts are expected to test support at RMB 14,600/mt. Market demand should be stable.