SMM Daily Review - 2011/9/1 Aluminum Market

Though LME aluminum gained again by nearly 2% overnight, most active SHFE aluminum contract opened only slightly higher at RMB 17,510/mt on Sept 1st. After hitting an intraday high of RMB 17,555/mt supported by exiting shorts, the contract erased earlier gains due to weakening Shanghai Composite Index, and finally closed RMB 10/mt or 0.06% lower at RMB 17,465/mt. Total positions of the contract dropped by 790 lots to 117,016 lots. With alleviating capital pressure, transactions during the day slightly increased, but were mainly speculative activities. SMM expects the contract to test support at RMB 17,450/mt during the following trading day.

Morning trading prices of spot aluminum in Shanghai were between RMB 17,820-17,860/mt on Sept. 1st, with premiums of RMB 50-80/mt over SHFE current-month aluminum prices. In the morning, purchases at lower prices among middlemen increased after capital pressure slightly alleviated. Upward space of spot aluminum prices was limited, however, due to disappointing SHFE aluminum prices, with spot premiums narrowing to within RMB 100/mt. Mainstream trading prices of spot aluminum in Wuxi also fell to near RMB 17,800/mt following weakening aluminum futures. Overall market transactions saw significant improvement during the day. In the afternoon, as SHFE current-month aluminum prices fell, spot quotes also dipped below RMB 17,800/mt, with premiums narrowing to near RMB 50/mt over current-month contract. Mainstream trading prices in the afternoon were between RMB 17,780-17,800/mt. Market transactions were rarely seen in the afternoon due to strong wait-and-see sentiment.