SHANGHAI, Jul. 16 (SMM) – SHFE 1310 aluminum contract opened flat at RMB 14,350/mt on Monday, and was mired at its opening price most of the session. SHFE three-month aluminum contract dived to RMB 14,305/mt at the tail of the session before closing at RMB 14,345/mt, down RMB 5/mt or 0.03%. Weak Chinese economic data drove investors out of the market. Trading volumes added 8,802 lots to 22,644 lots, but positions fell 4,122 lots to 197,418 lots. SHFE aluminum for October delivery is expected to test support at RMB 14,300/mt today.

Mainstream traded prices for spot aluminum in Shanghai were RMB 14,340-14,350/mt on Monday, RMB 20-30/mt lower than SHFE 1307 aluminum contract prices. Low-iron aluminum was traded around RMB 14,510/mt. Traders were in a hurry to liquidate stocks out of growing bearishness over future prices, but downstream producers largely stayed out of the market, driving spot aluminum prices down sharply, with spot discount expanding to RMB 30/mt. Although lower prices enticed some middlemen to go bargain hunting, overall trading was light. In the afternoon, spot market turned quiet, with sparse offers reported at RMB 14,350/mt.  

SMM aluminum price averaged RMB 14,370/mt on Monday, down from last week’s RMB 14,378/mt. SMM surveyed 38 aluminum ingot producers and traders on their forecasts for this week’s aluminum prices.

53% of the market players anticipate little changes in aluminum prices. The US dollar index fell following the US Federal Reserve’s announcement that QE will remain in place, but then rebounded due to downbeat Chinese economic data and worsening debt crisis in Europe. This will keep the light metal moving within tight ranges. LME aluminum will consolidate at USD 1,800/mt, and the most active SHFE aluminum contract will hover above RMB 14,300/mt. Spot aluminum will struggle at RMB 14,350/mt.

42% of market players expect a drop in aluminum prices this week. First, China registered a decline in both imports and exports in June, a reflection of weakening demand in both domestic and overseas markets. Second, high LME aluminum inventories and ample spot aluminum supply in China will weigh aluminum prices down. Third, negative economic indicators will also put downward pressure on aluminum prices. In this context, LME aluminum will meet strong resistance at the 30-day moving average and will likely retreat from USD 1,800/mt. SHFE 1310 aluminum contract will dip to RMB 14,200/mt. Spot aluminum may lose support at RMB 14,300/mt.   

The remaining 5% are optimism over this week’s aluminum prices. First, sustainable recovery in the US economy and continuation of bond-buying program are boosting market confidence. Second, weak economic indicators will likely drive the Chinese government to introduce economic stimulus. Third, falling aluminum inventories will also lend some support to aluminum prices. As such, LME aluminum will climb above the 30-day moving average to USD 1,850/mt. The most active SHFE aluminum contract will challenge resistance at RMB 14,400/mt. Spot aluminum will rebound to RMB 14,400/mt.