SHANGHAI, Aug. 11 (SMM) –SHFE 1510 aluminum failed in its attempts to climb above RMB 12,000/mt on Monday, and ended the day at RMB 11,965/mt. Trading volumes were down 9,350 lots to 27,690 lots, and positions were up 2,556 lots to 153,000 lots. China’s foreign trade data for July, released this past weekend, were depressing. China’s PPI continued falling in July. The contract should stay below the 5-day moving average in the short term.
Aluminum prices were mainly between RMB 11,900-11,920/mt in Shanghai on Monday, premiums of RMB 0-20/mt over August aluminum on the SHFE, versus RMB 11,890-11,910/mt in Wuxi and RMB 11,910-11,920/mt in Hangzhou. Traders were active in the market, but processors remained little interested in buying. In the afternoon, goods were offered at RMB 11,910-11,920/mt, but few deals were reported.
SMM surveyed 28 large aluminum smelters, traders and processors in China.
46% of them see little change in aluminum prices this week. LME aluminum should hold stable at USD 1,580-1,600/mt, versus RMB 11,940-12,000/mt for SHFE 1510 aluminum contract. More and more Chinese aluminum smelters are operating in the red, given continuous fall in aluminum prices. This, combined with production cuts in the sector, will put a floor under aluminum prices. On the other hand, a strong US dollar amid hopes for US interest rate hike, and depressing economic data, will offer no upward momentum to aluminum prices.
The rest 54% are bearish. LME aluminum should fall below USD 1,580/mt, and SHFE 1510 aluminum contract might drop below 6-year low of RMB 11,910/mt. Some loss-making aluminum smelters in China are still running. Falling production cuts will weaken cost support for aluminum prices. Aluminum stocks remain high. Processors buy only as needed in the off-season. Moreover, the US dollar will stay firm and recent Chinese economic data are discouraging, also boding ill for the light metal.