[Al Price] SMM Aluminum Market Daily Review (2015-8-3)

SHANGHAI, Aug. 4 (SMM) –SHFE 1510 aluminum contract fell to RMB 12,000/mt on Monday due to disappointing China manufacturing PMI for July. The contract moved below the daily moving average for most of the day as shorts dominated. Trading volumes were up 18,114 lots to 45,728 lots, and positions were up 7,554 lots to 148,000 lots.

Aluminum prices were mainly between RMB 12,030-12,040/mt in Shanghai on Monday, discounts of RMB 50-70/mt over August aluminum on the SHFE, versus RMB 12,020-12,040/mt in Wuxi and RMB 12,030-12,040/mt in Hangzhou. Easing liquidity crunch and lower prices lured some downstream buyers to go bargain hunting. In the afternoon, market turned quiet. 

SMM surveyed 35 large aluminum smelters, traders and processors in China. 

43% of them see little change in aluminum prices this week. More aluminum smelters in China have cut output against losses. Smelters will postpone delivery of goods under term contracts to support prices. As such, spot aluminum in China should find solid support at RMB 12,000/mt. LME aluminum should hold stable at USD 1,600-1,625/mt, versus RMB 12,000-12,200/mt for SHFE 1510 aluminum contract.

The rest 57% are bearish. 1. Expectations for US interest rate hike will keep the US dollar index elevated, thus pressuring base metals. 2. China’s official manufacturing PMI for July was disappointing. Efforts to stabilize China’s stock market ended in vain. 3. Downstream consumption has shown no signs of a turnaround. 4. Production cuts are not enough to counterbalance growing new capacity in northwest China. In this context, LME aluminum should fall below USD 1,600/mt, and SHFE 1510 aluminum contract might drop below RMB 12,000/mt.