SHANGHAI, Jun. 4 (SMM) – The night session was suspended last Friday due to the Dragon Boat Festival holiday. The most active SHFE aluminum contract initially advanced to RMB 13,545/mt Tuesday, but later sank to RMB 13,450/mt before finishing up RMB 15/mt at RMB 13,480/mt. Traded volumes gained 28,976 lots to 135,078 lots, while positions shed 604 lots to 135,078 lots on Tuesday. SHFE aluminum prices should fluctuate around the RMB 13,500/mt mark for the short term with significant upward resistance.
Spot aluminum traded mostly between RMB 13,310-13,320/mt in Shanghai, a discount of RMB 50-60/mt over the SHFE 1406 aluminum contract. Mainstream traded prices were RMB 13,300-13,310/mt Wuxi and RMB 13,350-13,360/mt in Hangzhou. Cargo holders held prices firm with low intention of raising cash, but downstream producers built stocks in light volumes on uncertainties over aluminum price movements. Market participants largely stayed on the sidelines on Tuesday, causing thin transactions. Cargo holders held prices firm at RMB 13,310/mt in the afternoon, but few purchases were reported.
SMM’s survey of 48 aluminum enterprises and traders showed that 33% of them expect spot aluminum prices in China to rise to RMB 13,320-13,360/mt this week for three major reasons.
First, positive expectation for the US nonfarm payroll data will drive LME aluminum prices to rise further to USD 1,850-1,900/mt.
Second, ample money supply for long investors in Chinese market may allow prices for the most active SHFE aluminum contract to test a high of RMB 13,660/mt.
Third, an easing of financial pressure at the beginning of the month will enable cargo holders to quote higher prices. Besides, spot discounts against the SHFE front-month aluminum contract prices will narrow before the delivery date.
25% of enterprises predict that spot aluminum prices will fall below RMB 13,250-13,280/mt this week for the followings:
First, LME aluminum prices may come under great pressure and fall to USD 1,810-1,850/mt after two failed attempts to break above USD 1,860/mt.
Second, SHFE 1408 aluminum contract prices will also face downside risk given a lack of any encouraging news and move between RMB 13,320-13,450/mt.
Third, softening consumption will drag spot prices below RMB 13,280/mt.
Finally, it was reported that Qingdao’s authorities were conducting investigation into financing trades, which will cause foreign banks to limit loans issued to Chinese commodity traders, in turn weighing down aluminum market.
42% of enterprises surveyed believe prices in China’s physical aluminum market will hold steady at RMB 13,280-13,320/mt, and here are the three major reasons behind their projection:
First, base metals on London Metal Exchange mostly dropped, which will negatively affect aluminum, leaving the prices between USD 1,820-1,870/mt.
Second, SHFE most active aluminum contract prices met strong resistance, but support at lower levels was also solid, meaning prices may consolidate between RMB 13,400-13,520/mt this week.
Third, although cargo holders in physical markets held quotations firm, buyers refused to purchase at highs.