SMM Aluminum Price Forecast (Apr. 15-19, 2013)

SHANGHAI, Apr. 15 (SMM) – Measures to combat over-capacity such as developing new applications for aluminum, production cuts at aluminum smelters, accelerating the elimination of outdated capacity, as well as renewed aluminum ingot purchases by the State Reserve Bureau (SRB), are all under consideration. Following the Qingming holiday in China, SHFE 1306 aluminum contract rose from RMB 14,555/mt to RMB 14,790/mt thanks to short-covering, but gains were limited by the lack of long buying. The most active SHFE aluminum contract bucked the trend by rising last Thursday as more shorts exited the market, but later gave back gains as longs took profits at highs. The upside space of SHFE aluminum should be limited due to weak fundamentals.

Spot aluminum prices tracked SHFE aluminum, rising from RMB 14,400/mt to RMB 14,600/mt early last week on stock replenishment following the three-day Chinese public holiday. Nevertheless, higher prices kept downstream producers purchasing only as needed. The fact that SHFE aluminum retreated whenever it approached a high left traders skittish, deflating buying interest later in the week. The eagerness of traders to sell pushed the discount over the SHFE 1304 aluminum contract to RMB 100/mt. Overall trading was thin.
 
Mixed economic data should keep aluminum prices within tight price ranges in the coming week, with LME aluminum prices hovering near USD 1,900/mt, and with prices for the most active SHFE aluminum contracts struggling at RMB 14,700/mt. Spot aluminum prices are expected to test support at RMB 14,500/mt. Overall trading should be light.