LME aluminum should move between USD 1,920-1,950/mt: SMM Morning Review

HSBC’s flash China manufacturing PMI for October rose from September, pointing to contraction for 12 consecutive months, but expectations remain on rebound of the Chinese economy. However, preliminary manufacturing PMI in the euro zone for October continued to shrink, weighing down data in Germany and France and aggravating worries over the debt crisis in the region. US initial manufacturing PMI for October rebounded slightly and new home sales for September rose significantly, but the US Federal Reserve failed to expand the scale of QE3 as expected. Mixed data caused the US dollar index to hover near 80. In this context, LME aluminum extended losses during the European session and dipped to a low of USD 1,925/mt. Trading volumes contracted. LME aluminum regained some losses at the tail of trading before finally closing at USD 1,945/mt, down USD 6.3/mt or 0.32%. Latest LME aluminum inventories decreased by 1,925 mt to 5,057,575 mt.

Aluminum prices remain weak as investors are bearish. LME aluminum should be pressured under USD 1,950/mt and move between USD 1,920-1,950/mt on Thursday. The SHFE 1212 aluminum contract is expected to open at RMB 15,390/mt on Thursday, with prices between RMB 15,350-15,450/mt. Spot discounts are expected between RMB 60-100/mt as traders will actively move goods to generate cash against limited downstream buying.