SMM Aluminum Price Forecast (Oct. 24-28)

Aluminum inventories monitored by SHFE surged by 40,000 mt following China’s National Day holiday due to the approaching delivery date and weak consumption, taking inventories which fell to a record low since February 2008 before the holiday to above 100,000 mt. SHFE three-month aluminum contract prices fell continuously for four consecutive days, following other base metals trends last week, after losing support from market fundamentals and with prices even falling below RMB 16,000/mt before stabilizing.

Sluggish consumption kept spot aluminum inventories high, and SMM aluminum prices plunged by over RMB 600/mt on two occasions, moving down from RMB 16,900/mt, with prices even falling to a new low of RMB 16,290/mt later in the week due to strong willingness by some cargo-holders to move goods to generate cash flow. Overall trading sentiment was modest given sufficient market supply.

SHFE 1201 aluminum contracts are expected to become the mostly actively traded contracts this week, with the contract prices expected to move between RMB 15,800-16,000/mt. In the spot aluminum market, a combination of adequate supply, weak consumption, and stronger willingness by some cargo-holders to move goods to generate cash flow will help drag down aluminum prices to around RMB 16,300/mt, with strong pressures expected at RMB 16,500/mt. Market transactions will remain sluggish.