SMM Daily Review – 2011/7/26 Aluminum Market

A bull market for SHFE aluminum contracts was seen on July 26th. In the morning, after opening at RMB 17,650/mt and consolidating at RMB 17,700/mt, most active SHFE 1110 aluminum contract prices surged and hit RMB 17,910/mt. In the afternoon, after regaining confidence, the longs pushed up SHFE aluminum prices which led base metals to gain and quickly broke RMB 18,000/mt. Finally closed price was RMB 18,015/mt, with a huge jump of RMB 350/mt or 1.98% from previous trading day. Total positions of most active SHFE aluminum contracts drastically increased by 34,378 lots to 158,358 lots. After SHFE aluminum prices surged by nearly 2% to break the RMB 18,000/mt mark, short-selling increased, and SMM expects SHFE aluminum prices to fluctuate at RMB 18,000/mt in the short term.

Traded prices of spot aluminum in Shanghai on July 26th were between RMB 17,980-18,000/mt, with premiums of positive RMB 50-100/mt over SHFE current-month aluminum prices. In the morning, after SHFE aluminum prices surged by 1%, spot aluminum prices also climbed and hit RMB 18,000/mt. With rising prices, goods holders remained optimistic towards aluminum prices and were actively building up inventories while keeping premiums firm. Market transactions were limited as a result of scarce supply. In the afternoon, after SHFE aluminum prices gained another 1%, spot aluminum prices also rose with premiums falling to zero. Mainstream traded prices of spot aluminum were between RMB 18,050-18,070/mt. Goods holders have been continuously holding goods. Downstream purchase interest was relatively low. Only few purchases were reported among middlemen.