SMM Aluminum Market Daily Review (2014-10-20)

SHANGHAI, Oct. 21 (SMM) – Last Friday night, SHFE 1412 aluminum contract rose to RMB 13,820/mt after starting higher at RMB 13,725/mt, and finished the night session at RMB 13,800/mt. Trading volumes totaled 56,150 lots, with positions up 718 lots to 130,934 lots.  

 

On Monday, caution before tomorrow’s release of China Q3 GDP data kept the most active contract moving in tight ranges. The contract closed at RMB 13,805/mt Trading volumes totaled 45,122 lots, with positions down 7,272 lots to 123,662 lots.  

 

Spot aluminum largely traded at RMB 13,670-13,680/mt in Shanghai on Monday, discounts of RMB 60-70/mt over SHFE 1411 aluminum contract, versus RMB 13,680-13,690/mt in Wuxi and RMB 13,690-13,700/mt in Hangzhou. The rise in aluminum prices was driven mainly by macro front, rather than market fundamentals. Rising prices depressed buying interest. In the afternoon, offers held stable, with a few transactions reported.

 

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

 

49% of those surveyed see aluminum prices to hold stable: (i) despite poor market fundamentals, positive technical indicators will help keep LME aluminum stable between USD 1,940-1,980/mt; (ii) the most active SHFE aluminum contract will stage a rally following dramatic falls, with prices expected between RMB 13,750-13,850/mt; (iii) in China’s domestic market, sellers did not sell aggressively at highs, lending support to aluminum prices. Spot aluminum prices will follow the trend of SHFE aluminum and stabilize between RMB 13,650-13,700/mt.

 

Another 39% hold bearish views: (i) on the technical side, LME aluminum looks set to decline to USD 1,900-1,950/mt; (ii) the most active SHFE aluminum contract remains under downward pressure from recent negative Chinese economic data and fluctuate between 13,550-13,750/mt; (iii) in domestic spot market, buyers will take a wait-and-see stance, which will bring spot aluminum prices down below RMB 13,650/mt. 

 

The remaining 12% are optimistic: (i) technical indicators suggest that LME aluminum is poised to rise above USD 1,980/mt; (ii) spot aluminum prices in China’s domestic market are likely to climb above RMB 13,700/mt.