LME aluminum should move between USD 2,090-2,040/mt on 14th sept: SMM Morning Review

Market focus shifted to the Fed’s decisions in its interest meeting overnight. The Fed announced QE3 in order to maximize employment in a context of price stability and to promote a stronger economic recovery. The Federal Reserve will purchase $40 billion a month in mortgage-backed securities until the outlook for jobs improves and will keep interest rates exceptionally low until at least 2015. In response, the US dollar plunged to near 79. LME aluminum broke through USD 2,100/mt to a fresh record high of USD 2,123.89/mt during European session. Trading volumes also shot up, but positions were down 1,161 lots as buying at highs weakened. Finally, LME aluminum ended the day up USD 38/mt or 1.83% to close at USD 2,118/mt. Latest LME aluminum inventories surged 117,000 mt to 4,971,325 mt.

As positive factors brought by QE3 have been digested some earlier, investors’ enthusiasm will fade, weakening gains of aluminum prices. LME aluminum should test support at USD 2,100/mt and move between USD 2,090-2,040/mt on Friday. SHFE 1212 aluminum contract is expected to open higher at RMB 15,850/mt on Friday, with prices between RMB 15,780-15,880/mt. Spot discounts are expected to narrow to RMB 80-40/mt as cargo holders will hold back goods at low prices and as downstream enterprises should refrain from buying at highs. Wait-and-see sentiment is expected to dominate the spot market.