SMM Aluminum Market Daily Review (2014-10-27)

SHANGHAI, Oct. 28 (SMM) – Last Friday night, SHFE 1412 aluminum contract was range-bound after starting at RMB 13,730/mt, and finished the night session at RMB 13,765/mt. Trading volumes totaled 7,208 lots, with positions down 314 lots to 95,828 lots. 

 

On Monday, falling home prices in China’s medium and large cities continued to dampen market sentiment. As a result, the most active contract continued to hover below the daily moving average and closed at RMB 13,745/mt. Trading volumes totaled 15,180 lots, with positions down 2,342 lots to 93,486 lots. Prices are expected to be range-bound for the short term.   

 

Spot aluminum largely traded at RMB 13,580-13,590/mt in Shanghai on Monday, discounts of RMB 110-120/mt over SHFE 1411 aluminum contract, versus RMB 13,570-13,580/mt in Wuxi and RMB 13,600-13,610/mt in Hangzhou. Sellers refrained from selling against large spot discounts, while buyers watched from the sidelines. In the afternoon, offers were unchanged, with sparse transactions reported. 

 

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

 

59% of those surveyed see aluminum prices to hold stable: (i) LME aluminum has found support at moving averages and will stabilize between USD 1,950-1,990/mt; (ii) the most active SHFE aluminum contract is also expected to consolidate between RMB 13,700-13,850/mt; (iii) in China’s domestic market, downstream consumption will remain sluggish, but sellers will hold back goods at lows, allowing spot aluminum prices to hold steady between RMB 13,580-13,620/mt.

 

Another 29% hold bearish views: (i) LME aluminum may decline to USD 1,910-1,950/mt due to negative technical indicators and a possible rise in the US dollar index on fear of interest rate hike by the US Fed; (ii) technical indicators imply that the most active SHFE aluminum contract may fall to RMB 13,600-13,750/mt; (iii) in domestic spot market, month-end cash crunch will depress buying interest, which will bring spot aluminum prices down below RMB 13,580/mt. 

 

The remaining 12% are optimistic: (i) surprisingly positive PMIs in China and the euro zone will boost risk appetite and push LME aluminum up to USD 1,980-2,020/mt; (ii) falling bauxite shipments from Guinea due to the Ebola outbreak will also lend some support to aluminum prices; (iii) suppliers in China’s domestic market will hold back goods at lows, which will help drive spot aluminum prices up above RMB 13,620/mt.