SHANGHAI, Oct. 29 (SMM) – December aluminum on the Shanghai Futures Exchange (SHFE), the most active one, started at RMB 14,400/mt on Monday. The light metal found its low at RMB 14,355/mt in early morning session, but rebounded later, closing at a session high of RMB 14,430/mt, up RMB 65/mt. Trading volumes added 640 lots to 7,968 lots, and positions also increased 944 lots to 58,412 lots.
Spot aluminum prices in Shanghai were RMB 14,490-14,500/mt, a premium of RMB 0-10/mt over SHFE 1311 aluminum contract. Prices in Wuxi edged higher to RMB 14,490-14,500/mt due to falling supply. Traded prices were RMB 14,480-14,490/mt in Hangzhou. Tightening liquidity at the month’s end deterred downstream producers and traders from buying. In the afternoon, aluminum prices remained little changed and trading was light.
SMM surveyed 30 large aluminum producers and traders in China.
53% of companies in SMM’s survey expect spot aluminum to remain stable between RMB 14,470-14,520/mt this coming week. First, SHFE 1311 aluminum contract will probably hold largely level, which will help spot aluminum stabilize as well. Second, current supply and demand are basically balanced. Third, a lack of positive economic data will deprive spot aluminum of any upward momentum.
Another 20% of market participants are bearish that spot aluminum will retreat to RMB 14,470/mt 1. Aluminum ingot is continuously arriving at Shanghai, Wuxi and Hangzhou, adding oversupply pressure. 2. Growing supply and tightening liquidity will leave cargo holders in rush to sell at discounts. 3. Demand from downstream producers and traders will dwindle due to tightening cash flows at the month’s end, which will weigh spot aluminum down.
The remaining 27% believe spot aluminum prices will rise above RMB 14,520/mt this week. First, the Third Plenary Session of the 18th CPC Central Committee to be held in November is expected to introduce policies favorable for base metals. Second, LME aluminum will draw support from a weaker greenback after downbeat US economic data raised expectations that the US Federal Reserve will delay QE3 exit. This will lend support to SHFE aluminum, thereby pushing spot aluminum up as well.