SMM Aluminum Market Daily Review (2015-5-11)

SHANGHAI, May 12 (SMM) –The PBOC’s interest rate cuts this past weekend had little impact on base metals market. SHFE 1507 aluminum contract fell to RMB 13,405/mt, but then rebounded to end at RMB 1,480/mt. Trading volumes totaled 42,292 lots, and positions were down 1,856 to 134,282.       

 

Spot aluminum largely traded between RMB 13,100-13,110/mt in Shanghai on Monday, discounts of RMB 190-210/mt over SHFE 1505 aluminum contract, versus RMB 13,070-13,090/mt in Wuxi, and RMB 13,110-13,120/mt in Hangzhou. Processors took a wait-and-see stance, while traders went bargain hunting in small amounts. In the afternoon, some traders went bargain hunting in small amounts. 

 

SMM surveyed 30 large aluminum smelters and traders in China. 

 

20% of them are bullish over aluminum prices this week: (i) strong crude oil will allow LME aluminum to rise above USD 1,900/mt; (ii) SHFE 1507 aluminum contract will break through RMB 13,500/mt since moving averages are pointing upward and MADC indicator is positive; (iii) in domestic spot market, spot discounts will narrow since the delivery date of SHFE front-month is nearing. Traders will be active in the market, so spot prices might rise above RMB 13,130/mt.     

 

Another 40% expect prices to stabilize: (i) relatively quiet macro front will keep LME aluminum in check within USD 1,860-1,900/mt; (ii) SHFE 1507 aluminum contract should move between RMB 13,400-13,500/mt; (iii) in domestic spot market, suppliers will refrain from selling at large spot discounts, which will help spot prices hold stable between RMB 13,090-13,130/mt.

 

The rest 40% are bearish: (i) exit of bulls and a strong US dollar will send LME aluminum down to below USD 1,860/mt; (ii) the PBOC’s interest rate cut has been digested and bears might enter, so SHFE 1507 aluminum contract might fall to RMB 13,400/mt; (iii) in domestic spot market, growing new capacity and inventories will cause pot prices to fall below RMB 13,090/mt.