SMM Daily Review – 2011/8/5 Aluminum Market

Due to plunging commodity prices overnight, most active SHFE 1110 aluminum contract prices opened lower at RMB 17,800/mt on August 5th. Within ten minutes after opening, most active SHFE aluminum contract prices fell and stopped at RMB 17,485/mt, down RMB 730/mt or 4% with positions falling by over 10,000 lots due to profit-taking and stop loss. At the tail of trading, all SHFE aluminum contract prices fell to a stop and SHFE aluminum prices slipped the most among all base metals prices. Long positions fell by over 25,000 lots during the day with bearish market sentiment growing, and most active aluminum contract prices are expected to keep falling and test RMB 17,000/mt. Latest SHFE aluminum stocks fell by 23,585 mt to 158,130 mt. SMM expects aluminum prices to keep falling this week despite continuous falling of aluminum stocks, as long capital is exiting the market.

Mainstream trading prices of spot aluminum in Shanghai on August 5th were between RMB 17,930-18,030/mt, with premiums of positive RMB 200-300/mt over SHFE current-month aluminum prices. SHFE aluminum prices fell and stopped within 10 minutes after opening, which battered spot market confidence, leading to mixed quotes. At the beginning, spot premiums were lifted by goods holders to a high of RMB 300/mt in a bid to stop aluminum prices from falling below the RMB 18,000/mt mark. However, mainstream trading prices gradually dropped later, which boosted purchasers interest with purchases at lower prices slightly increasing. Overall market sentiment was slightly active. In the afternoon, SHFE current-month aluminum prices fell to a stop near the tail of trading. However, spot aluminum prices stopped falling at RMB 17,900/mt. Both suppliers and buyers turned cautious during the end of the trading week due to plunging aluminum prices, and market transactions were quite rare as a result.