SHANGHAI, Sept. 1 (SMM) –SHFE 1511 aluminum fell to RMB 11,875/mt after opening at RMB 11,985/mt on Monday. Finally, the most active contract ended down RMB 45/mt or 0.38% at RMB 11,890/mt. Trading volumes were up 2,330 lots to 33,894 lots, and positions were up 1,224 lots to 121,000 lots.
Aluminum prices were mainly between RMB 11,790-11,800/mt in Shanghai on Monday, discounts of RMB 60-70/mt over September aluminum on the SHFE, versus RMB 11,790-11,810/mt in Wuxi and RMB 11,790-11,800/mt in Hangzhou. Demand picked up before the upcoming three-day holiday. Non-deliverable goods traded around RMB 11,800/mt, while deliverable goods traded at discounts of RMB 10-30/mt over SHFE 1509 aluminum. In the afternoon, a few deals closed at RMB 11,800/mt.
SMM’s latest survey of 38 large aluminum smelters, traders and processors in China reveals the following results:
53% of them expect aluminum prices to stabilize this week: News on production cuts in China will support aluminum prices. Suppliers in domestic spot market will hold back goods at lows, and demand will pick up before the 3-day holiday, another support for the light metal. Technically, SHFE 1511 and LME aluminum have found support near the 5-day moving average. Despite these positive notes, aluminum prices will lack upward momentum, though, as any rise will be vulnerable to short selling.
Another 13% are bullish: The PBOC’s recent liquidity injection will support stock and commodity market. Stock markets outside China also showed signs of recovery. Chinese government sees no room for any further sharp depreciation of yuan, offering breathing room for jittered market. LME aluminum should challenge resistance at USD 1,625/mt, while SHFE 1511 aluminum might rise above RMB 12,000/mt.
The rest 34% are bearish, citing chronically poor market fundamentals. On the supply side, about 1.75 million mt/yr capacity was shut down in China during January-August, but over 2 million mt/yr new capacity came online. Aluminum stocks in China’s major markets approached 1 million mt. Downstream buying interest waned compared with a year ago. SHFE 1511 aluminum suffered short selling at RMB 12,000/mt mark this past week, suggesting strong resistance at this level. The most active contract might fall below RMB 11,880/mt this week. A strong US dollar, and outflow of Chinese aluminum semis should send LME aluminum down below USD 1,560/mt.