SMM Al Survey: Consumption Sees Hope as “Gold September & Silver October” Starts

The SMM China Aluminum Ingot Trade Index rose slightly by 3.8% to 41% during August 29th to September 2nd, but was still below the balance line of 50%, indicating market sentiment remained low. Due to tightening credit supply, goods holders were actively liquidating to cash at lower prices, but purchases remained sparse, and domestic spot aluminum prices stagnated near RMB 17,800/mt. As the week progressed into September, capital pressure gradually alleviated and more buying was reported. This was reflected by higher SMM China Aluminum Ingot Trade Index.

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 40 aluminum traders with a total monthly traded volume nearly 310 kt. These traders are located in Shanghai, Wuxi, Hangzhou, Nanhai, Tianjin and Shenyang.

The SMM China Aluminum Ingot Trade Index – Transaction Index gained a slight 5.4% to 33.8%, but was still far away from the balance line of 50%. The slight increase was the result of purchases lured by lower prices offered on capital pressure at end of August, as well as increased demand to build up inventory entering September when capital pressure gradually alleviated.

The SMM China Aluminum Ingot Trade Index – Aluminum Price Expectation Index dropped slightly by 1.9% to 41.3%, and was still below the 50% balance line. Most traders expect better consumption this week, but with limited growth in the short term, since little changed spot aluminum stock will still be sufficient given relatively weak consumption and overall bearish market sentiment. Therefore, aluminum prices are expected to stabilize, whereas with a downward trend.

The SMM China Aluminum Ingot Trade Index – Downstream Order Expectation Index climbed to above the 50% balance line for the first time since August, after gaining 10.4% to 55%. Domestic aluminum consumption generally abides by the “Gold September & Silver October” principle. Entering September, as traders expect downstream orders to rise, aluminum consumption is also expected to improve at end of the year.