SMM Aluminum Market Daily Review (2013-11-4)

SHANGHAI, Nov. 5 (SMM) – January aluminum on the Shanghai Futures Exchange (SHFE), the most active one, opened at RMB 14,395/mt on Monday. The light metal climbed to RMB 14,400/mt in early morning session before immediately falling back to RMB 14,365/mt. Finally, SHFE 1401 aluminum contract closed RMB 15/mt lower at RMB 14,380/mt. Trading volumes increased 1,958 lots to 6,718 lots, while positions dropped 2,640 lots to 50,986 lots. Further decline could be on the way.

No shipments arriving this past weekend allowed cargo holders in Shanghai to hold offers firm, leaving mainstream traded prices at RMB 14,440-14,450/mt on Monday, a premium of RMB 20-30/mt over SHFE 1311 aluminum contract. Tighter supply in Wuxi pushed prices there up to RMB 14,440-14,460/mt. Prices in Hangzhou were lower at RMB 14,420-14,440/mt due to growing inventories and weak demand. In the afternoon, traded prices remained little changed, but trading volumes were thin.

SMM surveyed 28 large aluminum producers and traders in China.

21% of companies in SMM’s survey believe spot aluminum prices will rise above RMB 14,450/mt this week. First, aluminum inventories in China’s four major regions continued to drop, which will allow cargo holders to hold offers firm. Second, SHFE 1311 aluminum contract will probably rise as the delivery data is approaching. Rising SHFE current-month aluminum contract will push spot aluminum up.

Half of the market participants are bearish that spot aluminum will retreat from RMB 14,400/mt 1. A stronger US dollar will weigh LME aluminum down. This, in turn, will drag SHFE aluminum down, thereby sending spot aluminum down as well. 2. SHFE 1311 aluminum contract may fall back since technical indicators are pointing downward. 

The remaining 29% expect spot aluminum to remain stable between RMB 14,430-14,450/mt this coming week. SHFE aluminum will move in a tight range due to a lack of new economic data and since the Third Plenary Session of the 18th Communist Party of China (CPC) Central Committee is drawing near. Stable SHFE aluminum will help spot aluminum hold steady as well.