SMM Aluminum Market Daily Review (2014-8-4)

SHANGHAI, Aug. 5 (SMM) –Last Friday night, SHFE 1410 aluminum contract slipped to RMB 13,970/mt after starting at RMB 14,000/mt, and finished the night session at RMB 14,005/mt. Trading volumes totaled 60,200 lots, with positions up 1,374 lots to 159,306 lots.              

 

On Monday, the most active contract inched lower before ending at RMB 13,985/mt. Trading volumes totaled 40,790 lots, with positions down 6 lots to 159,300 lots. The light metal may be vulnerable at the 20-day moving average as bearish sentiment is running rampant.   

 

Spot aluminum largely traded at RMB 13,890-13,900/mt in Shanghai on Monday, a discount of RMB 30-40/mt over SHFE 1408 aluminum contract. Mainstream traded prices were RMB 13,900-13,910/mt in Wuxi and RMB 13,910-13,920/mt in Hangzhou. Despite rising 1408 aluminum contract, sluggish consumption sent prices down RMB 50/mt. In the afternoon, sellers held offers stable, with only a few deals completed. 

 

SMM’s recent survey of 40 aluminum smelters and traders in China reveals the following results:

 

Only 10% of those surveyed are bullish that spot aluminum prices in China will rise above RMB 13,920/mt this week. They believe that LME aluminum will rebound above USD 2,000/mt on positive technical indicators. Besides, continuously falling aluminum stocks in China will also offer solid support to prices. 

   

Another 60% expect spot aluminum prices to remain stable between RMB 13,860-13,920/mt for three reasons. First, LME aluminum is on track to move in a tight range of USD 1,950-1,990/mt. Second, SHFE 1410 aluminum contract has shown no signs of short selling, with prices expected between RMB 13,950-14,100/mt. Third, sellers in spot markets will hold back goods at lows. 

 

The remaining 30% are bearish that spot aluminum prices might fall below RMB 13,860/mt. Negative technical indicators and disappointing US economic data may drag LME aluminum down below USD 1,950/mt. Besides, SHFE 1410 aluminum contract will face downward correction as bearish sentiment is gathering pace, with prices expected at RMB 13,850-13,950/mt. What’s worse, sellers reporting a pileup of goods will rush to sell, but consumption will remain sluggish, putting downward pressure on spot aluminum prices.