SMM Aluminum Price Forecast (Sept. 13-16)

SHFE 1111 aluminum contract prices fell at first but rebounded later in the week, with mainstream prices moving between RMB 17,200-17,450/mt and facing strong pressure from the 30-day moving average. Power shortages in southwest China are becoming more severe in September, and aluminum producers in Guizhou and Guangxi provinces began to cut production due to power restrictions, and they will not resume normal operations until the high-water period in 2012 when power shortages ease. Although production cuts in the two provinces exert little impact on spot aluminum supply in the short term, they are still be favorable for aluminum markets and support SHFE aluminum prices to fall slower than other base metal prices. However, daily trading volumes were below 40,000 lots, with sluggish market sentiment dampening upward momentum in SHFE aluminum prices. SMM predicts LME aluminum prices will move around USD 2,400/mt in the coming week, and SHFE 1111 aluminum contract prices will struggle at RMB 17,400/mt.

SMM spot aluminum prices fluctuated around RMB 17,800/mt throughout the week. As mainstream trading prices of SHFE current-month aluminum contracts climbed, spot premiums over those contracts fell from RMB 100/mt, to almost zero. Unlike in previous years, aluminum consumption did not pick up at the beginning of September due to the weak global economy and continued inflationary pressure in China. Market transactions also stagnated due to the prevailing cautious sentiment among downstream buyers and middlemen. Spot aluminum stock in the region held stable at slightly higher than 300,000 mt. As such, it remains unlikely that any breakthrough will be seen in spot aluminum prices until consumption improves.