SHANGHAI, Jul. 8 (SMM) – Last Friday night, SHFE 1409 aluminum contract drifted lower after starting at RMB 13,665/mt, and finished the night session at RMB 13,605/mt. Trading volumes totaled 20,142 lots, with positions down 40 lots to 159,510 lots. On Monday, the most active contract retreated from the 20-day moving average to RMB 13,555/mt before ending down RMB 130/mt at RMB 13,560/mt. Trading volumes totaled 33,982 lots, with positions down 4,254 lots to 155,256 lots. With investors closing long positions, prices may test support at the 30-day moving average in the near term.
Spot aluminum largely traded between RMB 13,400-13,410/mt in Shanghai and Wuxi on Monday, a discount of RMB 40-50/mt over SHFE 1407 aluminum contract, versus RMB 13,410-13,420/mt in Hangzhou. Growing supply and bearish sentiment among downstream producers sent prices down. In the afternoon, sellers cut offers slightly to RMB 13,390-13,400/mt, with sparse transactions reported.
SMM’s recent survey of large aluminum smelters and traders in China reveals the following results:
Only 13% of the market players surveyed are bullish that spot aluminum prices will rise above RMB 13,450/mt this week. The most active SHFE aluminum contract is expected to follow LME aluminum up to RMB 13,600-13,700/mt. Meanwhile, arrivals into major trading markets remain limited, also lending support to prices.
Another 57% see spot aluminum prices little changed between RMB 13,380-13,440/mt. SHFE 1409 aluminum contract has found strong support, but will meet resistance at the upper end, with prices expected to hold largely stable between RMB 13,550-13,650/mt. In physical markets, sellers will hold back at lows, while buyers will shy away from higher prices, keeping prices in check.
The remaining 30% worry that spot aluminum prices will retreat below RMB 13,380/mt. On the technical side, the most active SHFE aluminum contract appears set to face downward pressure, with prices expected between RMB 13,480-13,550/mt. Buyers in physical markets will show little interest out of bearishness, boding ill for aluminum prices.