SMM Aluminum Market Daily Review (2014-3-10)

SHANGHAI, Mar. 11 (SMM) – SHFE 1406 aluminum contract inched down to RMB 13,155/mt after starting last Friday’s night session at RMB 13,200/mt, but then rebounded to RMB 13,230/mt before finishing at RMB 13,325/mt. Trading volumes during the night hours totaled 12,902 lots, and positions shrank 1,844 lots to 100,108 lots. During Monday’s daytime trading session, the most active contract rallied to RMB 13,190/mt moving lower to RMB 13,100/mt, but dropped again in the afternoon to RMB 13,095/mt before closing at RMB 13,140/mt, down RMB 150/mt or 1.13%. Trading volumes during the daytime hours totaled 22,416 lots, and positions surged 2,886 lots to 102,994 lots. Further price decline may be on the way since bearish sentiment still lingers.   

Spot aluminum largely traded at RMB 12,730-12,740/mt in Shanghai on Monday, a discount of RMB 230-240/mt over SHFE 1403 aluminum contract prices, RMB 12,720-12,730/mt in Wuxi, and RMB 12,740-12,750/mt in Hangzhou. Sellers held back goods against falling prices, while downstream producers stayed out of the market out of bearishness, leaving trading bleak. In the afternoon, offers remained unchanged, but few deals were done. 

SMM surveyed 40 large aluminum smelters and traders in China.

An overwhelming majority (78%) of those surveyed have painted a gloomy picture of this week’s spot aluminum prices, believing prices will fall below RMB 12,750/mt. First, the Ukraine crisis may turn out to be a “black swan”, keeping investors cautious about building long positions. As such, LME aluminum will vacillate between USD 1,710-1,760/mt.  Second, China suffered its first domestic corporate bond default in recent history, undermining market sentiment. This will keep SHFE 1406 aluminum contract in check within RMB 13,000-13,240/mt. Third, aluminum ingots continue to arrive, while downstream consumption remains sluggish, which will leave spot discounts over SHFE 1403 aluminum contract around RMB 200/mt.
 
The remaining 22% expect spot aluminum prices to hold stable at RMB 12,700-12,750/mt.  First, the most active SHFE aluminum contract will stage a technical rally following sharp declines earlier. Second, the upcoming delivery of SHFE 1403 aluminum contracts may offer some support to spot aluminum prices.