2011/5/13 Aluminum Market

China's central bank announced on Thursday that it will raise the reserve requirement ratio (RRR) of the country's lenders by 50 basis points, the fifth such increase in 2011. The raise will become effective on May 18th, and this move will lift the RRR for China's large financial institutions to a record high of 21%, a signal of China’s strong determination of combating inflation, but investors have already expected such move, so the RRR hike failed to exert great effect on European markets. Later, the US released a series of economic data, and both producer price index (PPI) for April and the initial claims for jobless benefits last week were better than market expectations, helping boost the US stocks, and the US dollar index fell back in response, with the index finally closing at 75.254.

LME aluminum prices were moving below USD 2,600/mt in Asian trading hours, and later moved higher in European trading hours due to better-than-expected economic data from the US. However, NYMEX crude oil prices failed to climb to USD 100/bbl, dampening increases in LME aluminum prices. Since spot aluminum has been traded at premiums for three consecutive days, a signal of bullish market fundamentals, LME aluminum prices fluctuated higher and finally closed at an intraday high of USD 2,630/mt, up USD 38.8/mt or 1.5% compared with the previous trading day. Total positions declined by 326 lots to 765,229 lots.

Today, LME aluminum prices are expected to stand steady at USD 2,600/mt, with prices expected between USD 2,600-2,660/mt. SHFE 1107 aluminum contract prices are expected to move between RMB 16,650-16,750/mt after opening slightly higher, while spot aluminum is expected to be traded at premiums of RMB 10-50/mt against SHFE current-month aluminum contract prices as the delivery date nears.