SHFE Aluminum Tumbles on Short Selling (2016-11-2)

SHANGHAI, Nov. 2 (SMM) – On Tuesday’s night trading, SHFE 1612 aluminum opened at RMB 14,100/mt and dropped to RMB 13,940/mt with exit of longs. SHFE 1612 aluminum fluctuated at around RMB 14,000/mt with market’s wary sentiment and finally ended at RMB 14,015/mt.

On Wednesday, SHFE 1701 aluminum, becoming the most actively traded one, opened at RMB 13,670/mt and then entered into downward track with short selling. During the afternoon trading, SHFE 1701 aluminum hit its daily downward limit, hurt by leaving of longs, and finally closed at RMB 13,200/mt. Trading volumes rose to 294,782 lots and positions increased 9,292 to 187,476. Positions of all SHFE aluminum contracts fell 11,846 to 736,304. SHFE aluminum contracts advanced to its daily upward limit on October 26 but dropped to its daily downward limit on Wednesday only in one and a half weeks. This showed that market’s attention on SHFE aluminum contracts increased. Aluminum inventories increased, not because of growing arrivals, but due to falling demand. Only a few goods from Qinghai, Gansu and Xinjiang arrived at consumer markets. SMM understands that the reason behind SHFE 1701 aluminum’s decline was downstream producers, who expect prices to fall, reduced purchases. Downstream producers will resume purchasing for their normal operation when inventories drop to certain levels.

SHFE 1701 aluminum is expected to open lower on Wednesday’s night trading and swing at around the 10-day moving average.