SMM Daily Review – 2011/7/20 Aluminum Market

Most active SHFE 1110 aluminum contract prices opened higher at RMB 17,750/mt on July 20th, but quickly fell to RMB 17,575/mt after position increases by the shorts and profit-taking by the longs. Later SHFE 1110 aluminum contract prices rebounded and tested RMB 17,600/mt. Finally closed price was RMB 17,635/mt, down RMB 20/mt or 0.11% from previous trading day. Total positions of most active SHFE 1110 aluminum contract increased by 3,598 lots to 111,218 lots. Though SHFE aluminum prices erased earlier gains due to stronger short momentum at high levels, adequate support can still be found at the moving averages. Therefore, SMM expects SHFE aluminum prices to fluctuate at RMB 17,700/mt in the short term.

Mainstream traded prices of spot aluminum in Shanghai on July 20th were between RMB 17,760-17,790/mt, with premiums of positive RMB 60-90/mt over SHFE current-month aluminum prices. In the morning, SHFE aluminum prices fell due to strong short momentum after opening higher, and spot aluminum prices met resistance at RMB 17,800/mt as a result. Goods holders increased supplies but kept premiums firm, and market transactions were rarely reported due to weak consumption. In the afternoon, while SHFE current-month aluminum prices kept narrowly fluctuating at RMB 17,700/mt, spot aluminum prices stood steady between RMB 17,700-17,780/mt. However, market transactions were scare due to rare supply. Though several large investors offered prices at RMB 17,800/mt, transaction were still rarely reported due to supply shortage. Wait-and-see sentiment was strong among both suppliers and buyers.