SMM Aluminum Market Daily Review (2015-3-23)

SHANGHAI, Mar. 24 (SMM) –SHFE 1506 aluminum contract climbed to RMB 13,355/mt after starting last Friday’s night session at RMB 13,285/mt, and ended at RMB 13,330/mt. Trading volumes totaled 18,574 lots, with positions up 2,694 to 112,946. 

 

On Monday, June aluminum on the SHFE dropped to RMB 13,265/mt before finishing at RMB 13,295/mt. Trading volumes totaled 52,396 lots, with positions up 7,686 to 117,938. 

 

Spot aluminum largely traded between RMB 13,050-13,060/mt in Shanghai on Monday, discounts of RMB 250-260/mt over SHFE 1504 aluminum contract, versus RMB 13,030-13,050/mt in Wuxi, and RMB 13,070-13,080/mt in Hangzhou. Falling HFE 1504 aluminum contract cooled buying in physical market, but sellers did not become panic. In the afternoon, sellers cut offers to RMB 13,030-13,040/mt, but trading was subdued. 

 

SMM surveyed 35 large aluminum smelters and traders in China. 

 

51% of them are bearish toward aluminum prices this week: (i) positive US economic data will allow the US dollar to stay firm, which will send LME aluminum down below USD 1,770/mt; (ii) poor market fundamentals and sentiment will weigh the most active SHFE aluminum contract down below RMB 13,150/mt; (iii) demand in domestic spot market has shown no signs of a turnaround, and inventories keep growing, which will push spot prices below RMB 13,030/mt.

 

Another 29% expect aluminum prices to hold stable: (i) with no guidance from the macro front, LME aluminum should stabilize between USD 1,780-1,800/mt; (ii) judging from the technical side, the most active SHFE aluminum contract should move between RMB 13,250-13,350/mt; (iii) in domestic spot market, suppliers will hold back goods at lows, while buyers from resist higher prices, which will keep spot prices steady between RMB 13,030-13,080/mt.   

 

The remaining 20% are bullish: (i) the US dollar index is unlikely to rise sharply in the short term. Technical indicators of LME aluminum are pointing upward. As such, LME aluminum should rise to USD 1,800-1,820/mt; (ii) improving sentiment will push the most active SHFE aluminum contract up to RMB 13,500/mt; (iii) large suppliers in domestic spot market will continue to withhold goods to support prices. As such, spot prices are expected to rise above RMB 13,080/mt.