SMM Aluminum Weekly Price Review and Forecast (24-28 Jun. 2013)

SHANGHAI, Jun. 24 (SMM) - Traders aggressively sold goods to generate cash at the end of mid-year, but downstream demand was soft, causing aluminum inventories to fall more slowly to around 1 million mt. Prices for the most active SHFE aluminum contracts fell from RMB 14,990/mt to RMB 14,220/mt, their lowest level since June 2010. Shorts pulled out of the market ahead of the weekend, helping SHFE 1310 aluminum contract rebound, but resistance at RMB 14,400/mt remains. 

Mainstream traded prices for spot aluminum in Shanghai tumbled from RMB 14,950/mt before the holiday to RMB 14,420/mt immediately afterward, a drop of RMB 530/mt and the lowest since May. Mainstream traded prices in Guangdong also plunged from RMB 14,700/mt to RMB 15,340/mt, a decline of RMB 640/mt and the lowest since May 20. Prices in Guangdong were RMB 400/mt higher than in Shanghai before the Chinese Dragon Boat Festival, stimulating aluminum smelters and some traders in east China to ship goods to Guangdong, causing inventories in the region to grow. The price spread between both regions, however, narrowed to RMB 250/mt after the holiday due to growing inventories in Guangdong. Cargo holders rushed to liquidate stocks as cash flows tightened and aluminum prices fell, but downstream producers purchased only as needed, depressing overall trading.

In the coming week, LME aluminum prices are expected to test support at USD 1,800/mt, with prices for the most active SHFE aluminum contracts testing resistance at RMB 14,400/mt. Spot discounts of RMB 50/mt or less are expected over SHFE 1307 aluminum contract prices. Supply will exceed demand and trading should be light.