SMM Daily Review - 2011/9/2 Aluminum Market

Most active SHFE 1111 aluminum contract opened slightly lower at RMB 17,465/mt on September 2nd. After erasing weekly gains to RMB 17,370/mt due to profit-taking by the longs and short-selling, the contract partially pared losses at the tail of trading on profit-taking among the shorts, and finally closed at RMB 17,435/mt, down RMB 50/mt or 0.29%. Total positions of the contract rose by 1,006 lots to 118,022 lots. Though power shortages in south China provided extra support for SHFE aluminum among all SHFE metals, a generally bearish market sentiment and only around 20,000 lots of transactions still dragged the metal down from weekly high. SMM expects most active SHFE aluminum contract to struggle at RMB 17,450/mt in the short term while waiting for the US non-farm payroll data to determine market direction.

Trading prices of spot aluminum in Shanghai were between RMB 17,780-17,820/mt on September 2nd, with premiums of positive RMB 40-80/mt over SHFE current-month aluminum prices. Spot market sentiment turned low with SHFE aluminum prices’ opening and moving lower. Transactions were hardly reported despite of inquiries. As only small volumes of downstream purchases were seen in the market, with sufficient supply, goods holders were lowered quotes to attract buyers, thereby dragging down mainstream trading prices to below RMB 17,800/mt. Overall market transactions were sparse. In the afternoon, following rebound of SHFE aluminum prices, a few middlemen purchased at lower prices, but supplies from goods holders were rare. Spot quotes in the afternoon were mainly between RMB 17,780-17,800/mt. Market transactions were scarce due to low market sentiment.