SMM Aluminum reports Price Forecast for Sept

LME aluminum prices soared in the first half of this month, while SHFE 1212 aluminum contract prices rose much slower. Last week, LME aluminum prices extended losses, down nearly 4%, whereas the most active SHFE aluminum contract proved resilient, down a mere 1%. The most-traded SHFE aluminum contract prices failed to break through RMB 16,000/mt early last week and dipped to a low of RMB 15,685/mt last Thursday. Downward pressure remained.

Middlemen’s willingness to purchase deliverable branded aluminum ingot cooled after the SHFE 1210 contract became the current-month contract last week. Hence, downstream consumption became the main driving force. Spot discounts narrowed to RMB 50/mt as last Monday was the last trading day of the 1209 contract, but expanded above RMB 100 after last Monday. Cargo holders generally held back goods as they believed downstream producers would build up stocks before the upcoming Chinese National Day holiday. As a result, spot discounts didn’t expanded further and spot aluminum prices were more resilient compared with SHFE aluminum. Mainstream prices in east China dropped to RMB 15,500/mt from RMB 15,560/mt, but downstream consumption failed to pick up. It remains to be seen whether demand for inventory replenishment will improve in the coming week. Overall trading was light.

In the coming week, LME aluminum should test support at USD 2,100/mt and SHFE 1212 aluminum contract prices are expected to meet strong resistance at RMB 15,800/mt. Spot aluminum markets will see a surge of inventory replenishment at the beginning of the coming week and cargo holders may actively move goods. In this context, spot discounts are expected between RMB 90-50/mt, but buying interest will gradually cool due to tight cash flows at the month’s end. Traders may begin to hold back goods, so trading is expected to turn quiet.