SHANGHAI, Apr. 16 (SMM) – Plunging LME aluminum last Friday caused SHFE 1306 aluminum contract to open lower at RMB 14,620/mt on Monday. In the afternoon, the most active SHFE aluminum contract shed more than 1%, with the low-end price dropping to RMB 14,490/mt as China’s Q1 GDP grew less than expected. Finally, SHFE aluminum for June delivery closed down RMB 210/mt or 1.43% at RMB 14,505/mt. Positions shrank 2,168 lots to 78,764 lots. Concerns over global economic growth triggered sell-off in commodities. The most-traded SHFE aluminum contract was more resilient compared with other base metals, but its support at RMB 14,500/mt is weak.
Spot aluminum was traded at RMB 14,460-14,480/mt in Shanghai on Monday, a discount of RMB 40-70/mt over SHFE 1304 aluminum contract prices. Low-iron aluminum was trade around RMB 14,650/mt. SHFE 1306 aluminum contract tumbled, hurting sentiment. Traders rushed to sell out of growing bearishness, but downstream producers and middlemen held to the sidelines, sending mainstream traded prices below RMB 14,500/mt. Prices for some brand deliverable aluminum ingot were stagnant at this mark. In the afternoon, the most active SHFE aluminum contract dropped further, stimulating some traders to sell for cash at lower prices of RMB 14,430-14,450/mt. Overall trading was subdued.
SMM aluminum price averaged RMB 14,490/mt on Monday, down from last week’s RMB 14,524/mt. A majority of the 38 aluminum ingot traders and producers surveyed by SMM expect aluminum prices to fall back to RMB 14,400/mt this week due to plunging commodity prices on Monday.
An overwhelming majority (71%) of market players are bearish toward this week’s aluminum prices for three reasons. First, most of the global economic indicators for March missed forecasts, rekindling concerns over gloomy economic outlook. Second, slack demand also exacerbated worries over overcapacity. Third, LME aluminum fell for a fourth straight trading day to USD 1,800/mt, while SHFE 1306 aluminum contract is vulnerable at RMB 14,500/mt, with spot aluminum also dropping to RMB 14,430/mt on Monday. Limited demand will leave spot aluminum hovering around RMB 14,400/mt this week, though resilient due to cost support.
The remaining 29% of market players expect aluminum prices to struggle near RMB 14,500/mt this week for two reasons. First, although market sentiment is bearish, the US dollar index rebounded only slightly. Second, cost support will attract dip-buying. In this context, LME aluminum will struggle at USD 1,850/mt, while prices for the most active SHFE aluminum contracts are expected to hover at RMB 14,500/mt. Spot aluminum will bounce back to RMB 14,500/mt on falling inventories.