SMM Daily Review - 2011/8/15 Aluminum Market

Most active SHFE 1110 aluminum contract prices opened slightly higher at RMB 17,535/mt and narrowly fluctuated in the morning session on August 15th. In the afternoon, positions of SHFE 1111 aluminum contracts significantly increased as a result of short activities, which dragged spot aluminum prices to below RMB 17,300/mt. SHFE 1111 aluminum contract also became the most actively-traded one, and closed at RMB 17,330/mt, down RMB 45/mt or 0.26%. Due to a dim future, most active SHFE aluminum contract price fell in the afternoon despite rising of other metals prices. However, it still found strong support at the 5-day moving average, and SMM expects most active SHFE aluminum contract prices to test RMB 17,300/mt in the short term.

Trading prices of spot aluminum in Shanghai on August 15th were between RMB 17,980-18,010/mt, with premiums of positive RMB 0-50/mt over SHFE current-month aluminum prices. In the morning, after SHFE current-month aluminum price failed to stay at RMB 18,000/mt, cargo-holders were actively selling with slight premiums. However, as downstream buyers and middlemen were waiting for market direction after change of SHFE current-month aluminum contract, mainstream trading prices fell below RMB 18,000/mt due to rare purchases. Overall market supply was excessive as a result. In the afternoon, SHFE current-month aluminum price continued to drop, but selling interest was low among goods holders, with only few quotes steady at RMB 17,980/mt reported. Market transactions were also rare due to strong wait-and-see sentiment.

SMM weekly aluminum ingot average price during August 8th to August 12th was RMB 17,915/mt, with a huge loss of RMB 513/mt or 2.78% from previous week. A recent SMM survey shows only 15% of market players expect aluminum prices to fall, which was a much lower percentage compared with previous week. Their reasons were mainly weak consumption and dim outlook of global economy. 70% of market players were neutral, believing aluminum prices are susceptible to fluctuation given mixed driving factors including positive low inventories and higher production cost and negative uncertain economic outlook which will led to cautious sentiment among both longs and shorts. The remaining 15% of market players are optimistic towards future aluminum prices, believing technical buying at lower prices following previous plunge and optimism towards aluminum consumption in the near future will help push up aluminum prices.