SMM Aluminum Market Daily Review (2014-2-24)

SHANGHAI, Feb. 24  (SMM) – SHFE 1405 aluminum contract drifted higher to RMB 13,550/mt after opening last Friday’s night session at RMB 13,510/mt, but fell back afterwards to close at RMB 13,500/mt. 4,464 lots were traded during the night hours, and positions added 1,074 lots to 86,018 lots. Rumors are flying around that several banks have suspended some types of property-related lending, igniting apprehension over demand for the light metal. This triggered panic selling in SHFE aluminum market, sending the most active SHFE aluminum contract down to RMB 13,355/mt on Monday. SHFE aluminum for May delivery ended Monday’s day session RMB 110/mt or 0.82% lower at RMB 13,385/mt. 13,116 lots were traded during the day session, and positions shrank 68 lots to 85,950 lots.        

 

Spot aluminum largely traded at RMB 12,980-13,000/mt in Shanghai on Monday, and RMB 12,920-12,960/mt in Wuxi. Prices in Hangzhou were higher at RMB 13,020-13,030/mt as local suppliers were reluctant to sell at low prices. SHFE 1403 aluminum contract inched down to RMB 13,290/mt, driving downstream producers and traders to the sidelines. In the afternoon, trading remained lackluster even after offers were cut to RMB 12,970-12,990/mt.

 

SMM surveyed 32 large aluminum smelters and traders in China. 

 

25% of those surveyed expect spot aluminum prices to hold steady at RMB 12,950-13,000/mt this week. First, continued dial-down of QE3 and negative US economic data came as no surprise, so LME aluminum will continue to fluctuate in a tight USD 1,730-1,770/mt range. Second, SHFE 1405 aluminum contract prices will face correction following Monday’s sharp decline. Third, wait-and-see sentiment by downstream producers will ease once SHFE aluminum prices come to stabilize. 

 

The remaining 75% are bearish that spot aluminum prices will fall below RMB 12,950/mt. First, despite a weaker greenback, downbeat PMI and consumer confidence index will weigh LME aluminum down. On the technical side, LME aluminum will face downward correction and move between USD 1,700-1,770/mt. Second, worries are over aluminum demand are growing amid rumors surrounding suspension of property-related lending by some banks. This will send the most active SHFE aluminum contract down to RMB 13,290/mt. Third, aluminum ingot will continue to arrive, adding to oversupply pressure. Fourth, lower operating rates at downstream producers will cut into aluminum demand. Meanwhile, falling SHFE aluminum prices will dampen buying interest.