SMM Daily Review – 2011/7/21 Base Metals Market

Most active SHFE 1110 aluminum contract prices opened lower at RMB 17,630/mt on July 21st and fell below the 5-day moving average later. At the tail of trading, SHFE 1110 aluminum contract prices further plunged and hit RMB 17,480/mt. Finally SHFE 1110 aluminum contract prices slightly rebounded and closed at RMB 17,505/mt, down RMB 135/mt or 0.77% from previous trading day. Total positions of most active SHFE 1110 aluminum contracts increased by 4,320 lots to 115,538 lots. Though SHFE aluminum prices opened lower and kept falling, the downward space will be limited due to tight spot aluminum supply. Therefore, SMM expects most active SHFE 1110 aluminum contract prices to test RMB 17,500/mt in the short term.

Mainstream traded prices of spot aluminum in Shanghai on July 21st were between RMB 17,770-17,800/mt, with premiums of positive RMB 70-100/mt over SHFE current-month aluminum prices. In the morning, though SHFE aluminum prices fell, spot aluminum prices kept rising and hit RMB 17,800/mt supported by tight supply. Purchases were reported at small volumes among middlemen, but were rarely seen among downstream buyers. Market transactions were limited despite active inquiries. In the afternoon, as SHFE current-month aluminum prices continued to fall, spot aluminum prices fell to near RMB 17,760/mt in response. Market transactions were rarely reported due to scarce supply.