Aluminum Price to Keep Falling within Bearish Market

The SMM China Aluminum Ingot Trade Index during August 1st to August 5th slightly rebounded to above the balance line of 50% to 50.7%, up by 3.8% from previous week. SHFE aluminum prices plunged during the week from RMB 18,600/mt to RMB 17,930/mt, and purchasing interest among spot aluminum buyers slightly improved, selling interest among goods holders also significantly rose, therefore domestic aluminum ingot trade market slightly warmed during the period, but was still limited by cautious downstream consumption.

In order to objectively and accurately show China’s spot aluminum ingot trading market, SMM has surveyed spot aluminum ingot traders from different regions, of different types and scales, based on their total traded volumes, downstream purchase volumes, traders inventories, cash flows and employee numbers etc.

This survey has covered 34 aluminum traders with a total monthly traded volume over 300 kt. These traders are located in Shanghai, Wuxi, Hangzhou, Nanhai, Tianjin and Shenyang.

The SMM China Aluminum Ingot Trade Index – Transaction Index fell continuously to 44.1% below the balance line of 50% to, down by 5.9% from previous week. Downstream buying interest turned lower due to recent surge of domestic aluminum prices. During the week from August 1st to August 5th, aluminum prices plunged but were still higher than the accepted levels of purchasers, therefore market transactions remained slightly sluggish during first half of the week. On August 5th Friday, after SHFE aluminum prices fell to a stop, some middlemen and downstream buyers purchased at lower prices in small volumes to build up their inventories, market transactions however remained limited.

The SMM China Aluminum Ingot Trade Index – Capital Index rose quickly and easily broke the balance line of 50% to 63.2%, up 14.6% from previous week. As capital pressure at enterprises has gradually alleviated in early August, and middlemen activities became limited due to high prices,capital reserve was slightly sufficient among domestic traders. China’s National Bureau of Statistics is scheduled to announce on August 9th the country’s CPI in July, and market expects inflation pressure will remain high in China. As higher possibility exists for tight monetary policies, capital pressure at enterprises is expected to be severe again.

The SMM China Aluminum Ingot Trade Index – Aluminum Price Expectation Index fell by a huge 58.2% from previous week to 13.2%, showing a quick reversion of market expectations. Continuous optimism towards aluminum prices backed by tight supply and capital finally ended due to panic selloff among investors caused by a sluggish world economy, indicating a plunging trend for aluminum prices within current bearish market.