SMM Aluminum Market Daily Review (2014-6-16)

SHANGHAI, Jun. 17 (SMM) – Last Friday night, SHFE 1408 aluminum contract crept higher to RMB 13,510/mt after starting at RMB 13,460/mt, and finished the night session at RMB 13,490/mt. Trading volumes totaled 48,866 lots, with positions up 1,768 lots to 157,722 lots. On Monday, the most active contract slipped to RMB 13,420/mt before closing at RMB 13,450/mt. Trading volumes totaled 29,018 lots, with positions down 6,136 lots to 151,586 lots. 

 

Spot aluminum largely traded between RMB 13,240-13,260/mt in Shanghai on Monday, a discount of RMB 50-70/mt over SHFE 1406 aluminum contract. Mainstream traded prices were RMB 13,230-13,250/mt Wuxi and RMB 13,260-13,270/mt in Hangzhou. Sellers demanded higher offers since SHFE 1407 aluminum contract, whose prices are higher than SHFE 1406 contract, will become the new front-month contract tomorrow. Buyers in general watched from the sidelines at the beginning of the week.  In the afternoon, some offered at RMB 13,250/mt, with few deals reported.

 

SMM surveyed 40 large aluminum smelters and traders in China. 

 

40% of the market players surveyed are bullish that spot aluminum prices will rise above RMB 13,280/mt this week, with reasons below. First, recent encouraging Chinese economic data will drive the most active SHFE aluminum contract up to RMB 13,440-13,540/mt. Second, fewer aluminum ingot arriving will lend support to spot aluminum prices. 

 

Half of those surveyed see spot aluminum prices steady between RMB 13,230-13,280/mt. First, SHFE 1408 aluminum contract will continue to meet resistance at RMB 13,500/mt, preventing spot aluminum prices from moving higher. Second, spot aluminum suppliers will hold back goods at lower prices, preventing prices from dropping.

 

The remaining 10% are bearish that spot aluminum prices will fall below RMB 13,230/mt. First, bearish technical indicator and instability in Iraq will likely send LME aluminum down to USD 1,810-1,840/mt. Second, growing bearish sentiment will pile downward pressure on SHFE 1408 aluminum contract, with prices expected between RMB 13,330-13,430/mt. Third, consumption in spot aluminum markets will remain sluggish during the off-season.