SMM Daily Review – 2011/8/10 Aluminum Market

Most active SHFE aluminum contract prices opened 3% higher at RMB 17,330/mt on August 10th, and slightly rose in the morning to struggle at RMB 17,500/mt. In the afternoon, after standing above the 5-day moving average, most active SHFE aluminum contract prices further rose to hit the 10-day moving average but failed to break through due to strong resistance. Finally closed price was RMB 17,590/mt, up RMB 605/mt or 3.56%. SHFE aluminum followed strong rebound of other base metals with most active SHFE aluminum contract prices recovering previous gaps. The rebounding trend also forced shorts to exit the market with position falling by over 12,000 lots during the day. SMM expects SHFE aluminum prices to struggle at RMB 17,500/mt given insufficient long confidence.

Mainstream trading prices of spot aluminum in Shanghai on August 10th were between RMB 17,960-18,000/mt, with premiums of positive RMB 110-150/mt over SHFE current-month aluminum prices. SHFE current-month aluminum prices gapped higher at RMB 18,000/mt today, boosting goods holders confidence to sell at RMB 18,000/mt. However, as spot premiums were kept firm after aluminum prices surged, buying interest turned low in the market, which pulled down mainstream trading prices with even spot premiums lower than RMB 100/mt reported. Market transactions were rare. In the afternoon, SHFE current-month aluminum prices recovered previous loss, but fluctuated at RMB 17,980/mt with premiums narrowing to RMB 20/mt due to scarce purchase. Meanwhile, most active SHFE aluminum contract prices opened 3% higher on August 10th and struggled at RMB 17,500/mt in the morning session, pushing back spot aluminum prices to above RMB 18,000/mt in south China. Mainstream trading prices were between RMB 18,150-18,190/mt. Goods holders were unwilling to sell due to limited supply, and market supplies turned scarce despite reduced downstream purchases compared with previous day. Market sentiment was active.