SMM Aluminum Market Daily Review (2014-10-8)

SHANGHAI, Oct. 9 (SMM) – The most active SHFE 1412 aluminum contract started Wednesday at RMB 14,045/mt, and fluctuated largely above the RMB 14,000/mt mark during the morning trading session.

 

The price of the contract followed LME aluminum down to an intraday low of RMB 13,925/mt subsequently, and finished down RMB 115/mt at RMB 13,945/mt. Trading volumes for the most active contract lost 31,606 lots to 33,946 lots, while positions added 250 lots to 146,206 lots. SHFE aluminum is highly likely to fall for the near term due to negative technical indicators. 

 

Physical aluminum in Shanghai traded Wednesday largely between RMB 13,980-14,000/mt, a RMB 0-20/mt discount to the SHFE front-month aluminum contract. Aluminum was sold between RMB 14,000-14,030/mt in Wuxi and RMB 14,000-14,010/mt in Hangzhou. SMM estimated that inventories in Shanghai, Wuxi, and Nanhai warehouses increased 44,000 mt after the Chinese National Day holiday. Downstream producers, however, remained reluctant to buy on Wednesday, leaving trading activity modest. In the afternoon, trading activity thinned, with a few deals completed between RMB 13,920-13,940/mt. 

 

24 Chinese aluminum smelters and traders surveyed by SMM are split over aluminum price movements this week.  

 

38% of those surveyed hold bearish views: (i) growing stocks after the weeklong holiday and slow consumption recovery will force sellers to sell at discounts of RMB 0-20/mt over SHFE front-month aluminum contract. Spot aluminum should trade between RMB 13,800-13,950/mt; (ii) the most active SHFE aluminum contract remains under downward pressure; (iii) a firm US dollar may send LME aluminum down to USD 1,880-1,920/mt. 

 

The remaining 62% see aluminum prices to hold stable: (i) rising alumina prices will provide cost support and prevent aluminum prices from falling. Besides, post-holiday demand may pick up, also lending support to aluminum prices; (ii) falling LME aluminum stocks will help keep LME aluminum prices stable between USD 1,920-1,970/mt; (iii) the most active SHFE aluminum contract will struggle around RMB 14,000/mt.