SMM Aluminum Market Daily Review (2015-8-24)

SHANGHAI, Aug. 25 (SMM) –SHFE 1510 aluminum took a freefall to RMB 11,805/mt after opening at RMB 11,950/mt on Monday. Finally, the most active contract ended down RMB 160/mt or 1.33% at RMB 11,830/mt. Trading volumes were up 29,996 lots to 55,470 lots, and positions were down 4,672 lots to 127,000 lots.  

SHFE 1509 aluminum fell to RMB 11,850/mt on Monday. Aluminum prices were mainly between RMB 11,770-11,790/mt in Shanghai, discounts of RMB 60-80/mt over September aluminum on the SHFE, versus RMB 11,770-11,800/mt in Wuxi and RMB 11,760-11,780/mt in Hangzhou. Processors bought only as needed, while traders hunted for cheap goods. In the afternoon, a few deals closed at RMB 11,780/mt.  

SMM’s latest survey of 36 large aluminum smelters, traders and processors in China reveals the following results:  

28% of them expect aluminum prices to stabilize this week: USD 1,520-1,550/mt for LME aluminum and RMB 11,800-12,000/mt for SHFE 1510 aluminum. The US dollar index fell steadily on expectations that the US Fed will delay interest rate hike, which will support LME aluminum. SHFE aluminum will draw support from rumors that more aluminum smelters in China will cut output. Some smelters might hold back goods against falling prices. Supply of goods under term contracts as the month is drawing to an end, another support for the light metal. 

The rest 72% are bearish. LME aluminum should fall below USD 1,520/mt, and SHFE 1510 aluminum contract might drop below RMB 11,800/mt. The scale of production cuts at aluminum smelters in China is small due to falling production cuts. New capacity keeps coming on stream. This, combined with poor downstream demand, will weigh on aluminum prices. Caixin’s flash China manufacturing PMI for August hit the lowest since March 2009. Sharp depreciation of yuan will make already fragile market sentiment even more pessimistic.