SMM Daily Review - 2011/8/3 Base Metals Market

Most active SHFE 1110 aluminum contract prices opened lower at RMB 18,285/mt on August 3rd, and surged later with strong long momentum to above the 5-day moving average. Most active SHFE aluminum contract prices climbed to RMB 18,500/mt after positions rose by over 20,000 lots, and finally closed at RMB 18,520/mt, up RMB 185/mt or 1.01% from previous trading day. As SHFE aluminum gained despite falling of other metals pries, market confidence for aluminum prices recovered following temporary fluctuation, and SMM expects SHFE aluminum prices to hit RMB 18,645/mt again after consolidating at RMB 18,500/mt.

Mainstream traded prices of spot aluminum in Shanghai on August 3rd were between RMB 18,640-18,660/mt, with premiums of positive RMB 40-60/mt over SHFE current-month aluminum prices. In the morning, as SHFE aluminum prices gained over 1% despite falling of other metals prices, spot aluminum prices rebounded to above RMB 18,600/mt in response. Selling interest at higher prices was strong among goods holders. Purchases among consumers also slightly increased as they were building up inventories. Market transactions were significantly improved compared with previous trading day. In the afternoon, as SHFE aluminum prices narrowly fluctuated, spot premiums were maintained at positive RMB 60/mt over SHFE current-month aluminum prices. Recent stable spot premiums also led to growing strong market confidence for spot aluminum. However, market transactions were rare during the day as a result of scarce purchases.