SMM Aluminum Price Forecast (Sept. 19-23)

Following China’s Mid-Autumn Festival holiday, SHFE 1111 aluminum contract prices rebounded after falling initially to RMB 17,250/mt, but still faced strong pressure at RMB 17,400/mt due to a lack of long momentum. Market sentiment was sluggish following the holiday due to European debt woes, and Chinese stock markets unlikely returned above 2,500 points. In addition, spot aluminum consumption was weak, and daily trading volumes of SHFE 1111 aluminum contracts were below 30,000 points, which provided no support for higher SHFE aluminum prices. Spot aluminum inventories were low, and aluminum producers in Guangxi and Guizhou provinces cut production due to power restrictions, which helped prevent aluminum prices from falling. As a result, SHFE aluminum prices will continue fluctuating in a narrow band in the near term.

Spot trading resumed Tuesday last week, following the Mid-Autumn Festival. Since downstream processors built inventories before the holiday, stock replenishment was sluggish as markets reopened. Cargo-holders were selling goods aggressively at slight discounts over SHFE current-month aluminum contract prices before the delivery date due to market pessimism. SMM aluminum prices fell rapidly to RMB 17,650/mt, down from RMB 17,800/mt, and it was the first time prices fell below RMB 17,700/mt since August 9th. Downstream consumption remained sluggish in the first half of September due to cash flow pressures and weak orders. Buying interest remained low despite lower prices, with supply surpluses reported.