SMM Daily Review – 2011/8/26 Aluminum Market

Most active SHFE 1111 aluminum contract opened slightly higher at RMB 17,330/mt on August 26th. After meeting temporary strong resistance, the contract broke through the 60-day moving average with increased buying, hitting an intraday high of RMB 17,445/mt. The contract finally closed RMB 80/mt or 0.46% higher at RMB 17,380/mt after partially erasing earlier gains due to profit-taking. Though most active SHFE aluminum contract finally broke through the 60-day moving average and hit a week high with improved investor risk appetite, SMM expect it to test RMB 17,450/mt in the short term given cautious market sentiment, and may slightly go up if US Fed president announces economic stimulation policies. Latest SHFE aluminum inventories continued to fell by 15,885 mt to 124,808 mt, and positive fundamentals will continuously help aluminum prices gather upward momentum.

Trading prices of spot aluminum in Shanghai on August 26th were between 17,780-17,820/mt, with premiums of positive RMB 150-170/mt over SHFE current-month aluminum prices. SHFE aluminum prices climbed in the morning session, but partially erased earlier gains during spot trading hours due to profit-taking. This, however, still boosted goods holder confidence with spot quotes being lifted. While on the contrary, due to month-end capital pressure, some goods holders lowered their quotes in order to attract buyers. Market transactions were rarely seen as consumption remained weak, with spot aluminum prices struggling at RMB 17,800/mt. In the afternoon, though SHFE current-month aluminum prices narrowly fluctuated, spot quotes rose to RMB 17,800-17,820/mt due to unwillingness to sell among goods holders. However, transactions were rare with the approaching weekend.