[Al Price] SMM Aluminum Market Daily Review (2015-7-20)

SHANGHAI, Jul. 21 (SMM) –SHFE 1510 aluminum contract became the most active one on July 20. The contract fell to RMB 12,470/mt, but then returned above the daily moving average before ending at RMB 12,495/mt. Trading volumes totaled 11,258 lots, and positions were up 1,890 lots to 118,654 lots. 

Aluminum prices were mainly between RMB 12,280-12,290/mt in Shanghai on Monday, discounts of RMB 100-110/mt over August aluminum on the SHFE, versus RMB 12,280-12,290/mt in Wuxi and RMB 12,290-13,000/mt in Hangzhou. SHFE 1508 aluminum contract fell back, driving buyers in spot market into a wait-and-see posture. This forced sellers to cut offers. In the afternoon, trading was muted. 

SMM surveyed 26 large aluminum smelters and traders in China. 

8% of them are bullish over this week’s aluminum prices. 1. Easing Greek debt crisis and positive KDJ and MACD indicators imply that LME aluminum will rise above USD 1,710/mt. 2. Rumors of aluminum smelter production cuts and positive technical side will push SHFE 1510 aluminum contract up to above RMB 12,580/mt. 3. Supply in spot market will fall as some will fulfill term supply contracts, so spot prices might rise above RMB 12,310/mt.  

Another 46% are bearish. 1. The rally of LME aluminum was due mainly to exit of shorts, suggesting that longs were cautious. A strong US dollar and strong resistance at highs will send LME aluminum down to below USD 1,685/mt. 2. It is uncertain whether rumors of production cuts are true. Expansions of new capacity will add to oversupply pressure. As such, SHFE 1510 aluminum contract might fall below RMB 12,400/mt. 3. Consumption in domestic spot market is sluggish, and pullback in aluminum prices after rebounding has triggered bearishness. So, spot prices might drop to RMB 12,280/mt.     

The rest 46% see little change in aluminum prices. 1. LME aluminum has found solid support, but a strong US dollar will keep it in check at USD 1,685-1,710/mt. 2. Technically, SHFE 1510 aluminum contract should hold stable between RMB 12,400-12,580/mt. 3. Holders of hedged goods will hold back goods against widening spot discounts, lending support to prices. But weak demand will deprive prices of upward momentum. As such, spot prices are expected at RMB 12,280-12,320/mt.