SMM Aluminum Market Daily Review (2014-6-9)

SHANGHAI, Jun. 10 (SMM) – Last Friday night, SHFE 1408 aluminum contract followed LME aluminum up to RMB 13,580/mt after starting at RMB 13,420/mt, and finished the night session at RMB 13,540/mt. Trading volumes totaled 80,078 lots, with positions up 15,496 lots to 149,014 lots. On Monday, the most active contract jumped to RMB 13,680/mt before ending the day up RMB 265/mt at RMB 13,675/mt. Trading volumes soared by 126,550 lots, with positions also up 32,338 lots to 181,352 lots.

Spot aluminum largely traded between RMB 13,270-13,280/mt in Shanghai on Monday, a discount of RMB 80-90/mt over SHFE 1406 aluminum contract. Mainstream traded prices were RMB 13,260-13,270/mt Wuxi and RMB 13,310-13,320/mt in Hangzhou. Sellers showed high selling interest, but buyers watched from the sidelines, sending prices down. In the afternoon, cargo holders sat on their inventories for better prices after rising SHFE aluminum prices turned them bullish. 

SMM surveyed 35 large aluminum smelters and traders in China.

57% of the market players surveyed are bullish that spot aluminum prices will rise above RMB 13,350/mt this week, with reasons below. First of all, technical indicators suggest that LME aluminum will climb above USD 1,900/mt and the most active SHFE aluminum contract will advance above RMB 13,600/mt. Second, rising SHFE aluminum prices will lure traders in and encourage suppliers to demand higher offers.

Another 34% see spot aluminum prices little changed around RMB 13,300/mt. First, SHFE 1408 aluminum contract will have little upward momentum following sharp rise earlier, with prices expected to consolidate between RMB 13,450-13,600/mt. Second, traders will enter the market for arbitrage, but this will be offset by low buying interest from downstream producers, keeping spot aluminum prices in check. 

The remaining 9% have pained a gloomy picture, fearing that spot aluminum prices will fall to RMB 13,200/mt. a bout of profit taking may take place, which will send SHFE 1408 aluminum contract down to RMB 13,300-13,400/mt. Meanwhile, the arrival of the off-season and tight liquidity will deter downstream producers from building up stocks.