SMM Aluminum Market Daily Review (2015-5-18)

Published: May 19, 2015 09:14 (GMT+8)

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On Monday, SHFE 1507 aluminum contract opened at RMB 13,280/mt.

SHANGHAI, May 19 (SMM) –On Monday, SHFE 1507 aluminum contract opened at RMB 13,280/mt. The contract ended the day down RMB 50/mt or 0.37% at RMB 13,285/mt. Trading volumes were down 5,408 lots to 20,192 lots, and positions were down 2,826 to 129,200. The contract will test support at the 20-day and 30-day moving average in the short term.

Spot aluminum largely traded between RMB 13,070-13,090/mt in Shanghai on Monday, discounts of RMB 150-170/mt over SHFE 1506 aluminum contract, versus RMB 13,050-13,070/mt in Wuxi, and RMB 13,080-13,100/mt in Hangzhou. Spot discounts widened by RMB 50/mt after delivery of SHFE 1505 aluminum contract. Processors went bargain hunting in small amounts. In the afternoon, trading was quiet.

SMM surveyed 34 large aluminum smelters and traders in China.

12% of them are bullish over aluminum prices this week: SHFE 1507 aluminum contract will rebound to RMB 13,400/mt; spot aluminum in domestic market will trade around RMB 13,150/mt, discounts of RMB 150-190/mt over SHFE front-month contract. They cited three positive factors: 1) the traditional high-demand season has not ended; 2) deliverable brand aluminum ingot is not highly available in the market, which will keep shorts cautious about entering; 3) market liquidity is relatively high.

Another 24% expect prices to stabilize: SHFE 1507 aluminum contract will range RMB 13,250-13,350/mt; spot aluminum in domestic market will trade at RMB 13,050-13,100/mt. Longs will take profit at highs once SHFE aluminum rise to RMB 13,400/mt. Shorts will be cautious about opening positions against low availability of deliverable brand aluminum ingot in the market.

The rest 64% are bearish: SHFE 1507 aluminum contract will fall below RMB 13,250/mt; spot aluminum in domestic market will trade lower to RMB 13,000-13,050/mt. They give five negative factors: 1) technically, SHFE aluminum will trend down; 2) LME aluminum is vulnerable to losses due to flooding of Chinese aluminum semis in overseas market; 3) aluminum stocks in China’s major regional markets have surpassed 1.2 million mt, higher than the same period last year; 4) aluminum prices in Guangdong are lower than in east China, which will prompt smelters to ship aggressively to east China, weighing on local prices; 5) demand remains soft.

SHFE aluminum prices Shanghai aluminum prices

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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