SHANGHAI, Sept. 29 (SMM) –SHFE 1512 aluminum refreshed a six-year low of RMB 11,730/mt after opening at RMB 11,810/mt on Monday. Finally, the most active contract ended down RMB 75/mt or 0.63% at RMB 11,750/mt. Trading volumes were down 14,556 lots to 19,054 lots, and positions were up 6,462 lots to 148,000 lots.
Trading activity died down in east China spot aluminum market on Monday. Some traders lowered offers to lure buyers for fear that prices might fall after the holiday. Prices were mainly between RMB 11,750-11,770/mt in Shanghai, discounts of RMB 0-20/mt over SHFE 1510 aluminum, versus RMB 11,750-11,770/mt in Wuxi and RMB 11,740-11,760/mt in Hangzhou. In the afternoon, a few deals closed at RMB 11,750-11,760/mt.
SMM’s latest survey of 28 large aluminum smelters, traders and processors in China reveals the following results:
64% of them expect aluminum prices to stabilize this week: USD 1,550-1,580/mt for LME aluminum and RMB 11,700-11,800/mt for SHFE 1512 aluminum. They said that pre-holiday risk aversion and stocking downstream will put a floor under prices.
The rest 36% are bearish. They worry that LME aluminum will fall below USD 1,550/mt and SHFE 1512 aluminum contract will fall below RMB 11,700/mt. They have listed a series of negative factors. In domestic spot market, pre-holiday stocking will die down since the week-long holiday is just two days away. Sellers will remain in a hurry to sell. For SHFE 1512 aluminum contract, it has fallen below all moving averages and there is still room for declines. On the macro front, the US Fed sent signal of possible rate hike later this year. This drove the US dollar index up, pressuring commodity market. Slump in mining giant Glencore’s shares triggered panic selling in base metals.
SMM survey found that those that expect prices to stabilize before the week-long holiday see prices return to losses after the holiday. Aluminum consumption is weaker than a year ago. Aluminum stocks will grow significantly in China’s major markets, such as Shanghai, Wuxi, Nanhai, etc. The scale of production cuts is small. In this context, market oversupply will only worsen, exerting downward pressure on post-holiday prices.