SMM Aluminum Market Daily Review (2014-3-31)

SHANGHAI, Apr. 1 (SMM) – Last Friday night, SHFE 1406 aluminum contract inched up to RMB 13,090/mt after starting at RMB 13,075/mt. Prices, however, fell back to RMB 13,035/mt afterwards to end the night session at RMB 13,045/mt. Trading volumes totaled 10,802 lots, and positions gained 1,692 lots to 119,064 lots. On Monday, June aluminum on the SHFE drifted lower to RMB 12,970/mt before rebounding to RMB 13,020/mt, closing the daytime session up RMB 20/mt at RMB 13,015/mt. Trading volumes totaled 12,042 lots, and positions were up 1,294 lots to 118,666 lots.

Spot aluminum largely traded at RMB 12,590-12,610/mt in Shanghai on Monday, RMB 12,590-12,600/mt in Wuxi, and RMB 12,600-12,610/mt in Hangzhou. Traders were cautious about buying after SHFE 1404 aluminum contract dipped to RMB 12,790/mt, but became more willing to buy once SHFE aluminum rebounded. In the afternoon, offers remained little changed. A few traders increased purchases out of optimism.

SMM surveyed 45 large aluminum smelters and traders in China.

33% of market players have painted a gloomy picture of this week’s spot aluminum prices, believing prices will fall below RMB 12,550/mt. First, on the technical side, LME aluminum will lack upward momentum, with prices expected between USD 1,730-1,750/mt. Second, the recent rally in SHFE 1406 aluminum contract was driven by technical support rather than an improvement in market fundamentals, so prices for the most active contract may fall back to RMB 12,800-13,100/mt. Third, downstream consumption has yet to fully recover. The uptick in spot aluminum prices was the result of market speculation, so the price rebound will prove only transitory.

Another 29% expect spot aluminum prices to hold largely stable between RMB 12,550-12,650/mt. 1. LME aluminum will fluctuate in a tight USD 1,750-1,780/mt range. 2. SHFE aluminum prices have shown signs of fallback, which will keep buyers in physical markets cautious. 3. Increased liquidity at the start of the new month will put a floor under spot aluminum prices.

The remaining 38% are bullish that spot aluminum prices will break through RMB 12,650/mt.  1. KDJ indicator of LME aluminum is pointing upward, so prices may drift higher to USD 1,750-1,800/mt. 2. Optimism over US non-farm payrolls will boost base metals prices. 3. Expectations are running high that the Chinese government will unleash stimulus measures to fuel economic growth, which will lend support to SHFE aluminum prices. 4. Cargo holders will hold offers firm now that SHFE aluminum prices have rebounded.