LME aluminum prices dropped down USD 22/mt or 1.1% settling at USD 1,972/mt

Manufacturing contraction showed in major economies and the United States’ May non-agricultural employments grew less than expected, with the unemployment rate rebounding, increasing risk aversion and leading to widespread sell-off of commodities and buying of haven gold. LME aluminum prices dropped together with other base metals prices. Strong short selling led to a large increase in total positions by 5,187 lots to 726,748 lots. The light metal eventually lost USD 22/mt or 1.1% settling at the intraday low USD 1,972/mt, which is also a 2012 low. Latest LME aluminum inventories dropped 1,725 mt to 4.9172 million mt.

Weak European and US data will weigh on domestic financial markets. Aluminum will maintain the downward pattern. LME is closed for today and tomorrow, leading to a lack of direction for SHFE aluminum. The most active SHFE aluminum contract for September delivery should meet strong resistance at RMB 15,900/mt and test support at RMB 15,850/mt. The moving band should be RMB 15,850-15,950/mt. With the current-month SHFE aluminum contract wandering low, the spot aluminum market is seeing stronger bearishness. However, goods holders will be unwilling to move goods when prices drop. Spot premiums and discounts should stay within RMB 20/mt. With sellers and buyers requiring different prices, deals will be quite limited.