SMM Daily Review - 2011/9/16 Aluminum Market

Most active SHFE 1111 aluminum contract opened slightly higher at RMB 17,385/mt on September 16th. After hitting an intraday high of RMB 17,405/mt at the beginning of trading, the contract quickly slipped on profit taking by the longs with positions dropping by 3,758 lots, and finally closed at RMB 17,350/mt, up RMB 10/mt or 0.06% from previous trading day. We also noticed a position increase of 3,284 lots for SHFE 1112 aluminum contract which is to become the most active one. Market transactions contracted to only 16,000 lots as investors were cautious after SHFE aluminum showed signs of stagnation. Given strong resistance at the RMB 17,400/mt mark, SMM expects most active SHFE aluminum contract to stay below the level until it gains enough upward momentum. Latest SHFE aluminum stock decreased 1,334 mt to 110,016 mt.

Traded prices of spot aluminum in Shanghai were between RMB 17,650-17,680/mt, with premiums of RMB 130-150/mt over SHFE current-month aluminum prices. In the morning, spot aluminum price stagnated at the low-end after SHFE current-month aluminum contract erased gains from a higher opening. After SHFE 1110 aluminum contract became the current-month contract, goods holders’ confidence for support at RMB 17,500/mt was relatively strong, with spot premiums held steady above RMB 100/mt. Stabilizing spot price at the low-end also attracted purchases from some downstream buyers to build up their stocks, and market transactions slightly improved from previous trading day. In the afternoon, SHFE aluminum transactions remained sluggish, with SHFE current-month aluminum contract fluctuating near RMB 17,500/mt. However, after SHFE 1110 became the current-month aluminum contract, goods holders’ selling interest at lower prices turned low, and spot aluminum quotations were pushed to RMB 17,670-17,700/mt by limited supply. Though inquiries from middlemen were active, market transactions were rarely seen due to climbing prices.