SMM Aluminum Price Forecast (Oct. 10-14)

Long investors exited the market before China’s National Day holiday due to weak macro economic conditions, and SHFE aluminum prices fluctuated widely last week due to strong short selling pressures. SHFE three-month aluminum contract prices fell below RMB 16,000/mt for the first time in 2011 on Monday and hit a new low of RMB 15,850/mt. Later SHFE three-month aluminum contract prices found solid support at RMB 16,000/mt on Thursday after opening significantly lower, with prices struggling at RMB 16,500/mt and returning above the 5-day moving average. As China’s National Day holiday neared, short investors also exited the market due to uncertainties over international economic conditions. Weaker selling pressure helped support SHFE aluminum prices to fall slower than other base metals, and trading volumes also decreased to lower than 100,000 lots, with trading sentiment turning weaker.

As businesses began to close out their books during this last week of the third quarter, there was a noticeable cooling in traders’ willingness to liquidate stocks for cash at low prices. Due to low spot inventory levels and stock building before China’s National Day holiday, SMM spot premiums stayed high near RMB 200/mt. However, capital pressures at the end of the quarter, inadequate order volumes, a generally bearish economic environment, and extremely limited inventory building downstream this year eroded the upward momentum of spot aluminum prices. Encountering strong resistance at RMB 17,100/mt, spot aluminum prices finally slipped below the RMB 17,000/mt mark following a plunge in SHFE aluminum prices. With the approaching holiday, few inquiries and fewer downstream purchases were seen during the second half of the week. Goods holders exited the market one after the other, leaving the spot aluminum market quiet.