SHANGHAI, Nov. 17 (SMM) –SHFE 1601 aluminum opened at RMB 10,180/mt on Monday. The contract briefly climbed to RMB 10,240/mt before pulling back to RMB 10,070/mt as longs exited out of bearishness. Finally, the most active contract ended down RMB 45/mt or 0.44% at RMB 10,105/mt. Trading volumes were down 68,776 lots to 197,000 lots, and positions were down 10,554 to 250,000. 57,400 mt of aluminum ingot was delivered for the SHFE 1511 aluminum contract.  

In east China spot aluminum market, buying activity was tepid, cubing price gains. Prices were mainly between RMB 10,120-10,130/mt in Shanghai on Monday, discount of RMB 110-100/mt over SHFE 1511 aluminum, versus RMB 10,110-10,130/mt in Wuxi and RMB 10,120-10,140/mt in Hangzhou. In the afternoon, trading was subdued, with only a few deals reported at RMB 10,100-10,110/mt. 

SMM’s latest survey of 38 large Chinese aluminum smelters, traders and processors reveals the following results:  

8% of them are bullish over aluminum prices this week: LME aluminum will return above USD 1,480/mt, and SHFE 1601 aluminum contract will rebound above RMB 10,200/mt. There are a huge number of shorts in SHFE aluminum market, who are likely to exit after continuous price declines. Meanwhile, more smelters in China are expected to cut output against growing losses from lower prices. These will drive a rally in prices. 

Another 47% are bearish: LME aluminum will sink below a six year low of USD 1,460/mt, and SHFE 1601 aluminum contract will fall below RMB 10,000/mt. China’s monthly aluminum production remains high, so are inventories. Processors remain little interested in restocking. Spot discounts in domestic spot market remain above RMB 100/mt, which will weigh on SHFE aluminum. A firm US dollar and weakness in other base metals will pressure LME aluminum. 

The rest 45% expect aluminum prices to stabilize: USD 1,460-1,480/mt for LME aluminum and RMB 10,000-10,200/mt for SHFE 1601 aluminum. The decline in trading volumes suggests that both longs and shorts are cautious at current price levels. Shorts tend to exit and longs tend to enter once prices fall below RMB 10,000/mt. Should prices rise, shorts will reenter. So, prices lack momentum to rise or drop.