SMM Aluminum Market Daily Review (2015-11-2)

SHANGHAI, Nov. 3 (SMM) –SHFE 1601 aluminum fell to RMB 10,285/mt after opening at RMB 10,360/mt on Monday. The most active contract ended down RMB 35/mt or 0.34% at RMB 10,315/mt. Trading volumes were down 35,296 lots to 156,000 lots, and positions were up 8,054to 273,000. Positions of SHFE aluminum index grew 2,966 to 613,000.  

In east China spot aluminum market, more smelters released goods into the market, adding to market supply. Prices were mainly between RMB 10,280-10,310/mt in Shanghai, discount of RMB 70-50/mt over SHFE 1511 aluminum, versus RMB 10,280-10,310/mt in Wuxi, and RMB 10,270-10,290/mt in Hangzhou. In the afternoon, only a few deals were done, with prices reported at RMB 10,280/mt. 

SMM’s latest survey of 25 large Chinese aluminum smelters, traders and processors reveals the following results:  

40% of them expect aluminum prices to stabilize this week: Total positions of all SHFE aluminum contracts showed signs of stabilizing after rising to 620,000, indicating that short selling has lost some steam. Shorts are cautious about entering, and so are longs, which will keep prices in tight ranges. 

Another 40% are bearish: LME aluminum will fall below USD 1,470/mt, and SHFE 1601 aluminum contract will fall below RMB 10,250/mt, citing a series of negative factors. 1. Falling power costs and subsidies from local governments will weigh on prices. 2. The scale of production cuts is smaller than expected. Commissioning of new capacity will leave supply still high. 3. Consumption has softened. 

The rest 20% are bullish: LME aluminum will return above USD 1,490/mt, and SHFE 1601 aluminum contract will rebound above RMB 10,400/mt. Total positions of all SHFE aluminum contract have risen to more than 620,000, many of which are short positions. Shorts are likely to exit this week. Aluminum prices should upward correction after continuous dramatic declines.