SMM Aluminum Market Daily Review (2015-11-9)

SHANGHAI, Nov. 10 (SMM) –SHFE 1601 aluminum briefly touched RMB 10,625/mt after opening at RMB 10,615/mt on Monday, but then fell back to RMB 10,570/mt in morning trading. In the afternoon, longs exited as prices lacked upward momentum, sending prices down to RMB 10,530/mt. Finally, the most active contract ended up RMB 5/mt at RMB 10,550/mt. Trading volumes were up 22,402 lots to 227,000 lots, and positions were up 16,476 to 254,000. 

In east China spot aluminum market, prices followed SHFE aluminum up on Monday. Suppliers were eager to sell for fear that the rise will be short-lived, but buying was poor. Prices were mainly between RMB 10,410-10,420/mt in Shanghai, discount of RMB 130-140/mt over SHFE 1511 aluminum, versus RMB 10,410-10,430/mt in Wuxi and RMB 10,410-10,420/mt in Hangzhou. In the afternoon, a few deals closed at RMB 10,410/mt.  

SMM’s latest survey of 30 large Chinese aluminum smelters, traders and processors reveals the following results:  

Half of them expect aluminum prices to stabilize this week: They understand that both longs and shorts are cautious about entering, given that aluminum price trend is unclear. 

Another 33% are bearish: LME aluminum will fall below USD 1,510/mt, and SHFE 1601 aluminum contract will fall below RMB 10,500/mt. A firm US dollar and weak SHFE aluminum will act as a drag on LME aluminum. In domestic spot market, processors will show low buying interest, while smelters and traders will be eager to sell for cash, which will widen spot discounts. As for SHFE aluminum, many shorts have yet to withdraw. Once prices rise, more shorts will enter, thus pulling prices down again.  

The rest 17% are bullish: LME aluminum will return above USD 1,530/mt, and SHFE 1601 aluminum contract will rebound above RMB 10,650/mt. News came in about production cuts at aluminum smelters and alumina refineries in China. Market hopes are growing that China will hike export rebate on aluminum semis. These will help drive a rally in aluminum prices.