LME aluminum should move between USD 2,120-2,160/mt on 13th Dec: SMM Morning Review

The Federal Reserve (Fed) announced overnight that it will continue monthly purchase of USD 40 billion mortgage-backed securities, buy additional USD 45 billion long-term Treasury bonds and keep low interest rate unchanged until at least mid-2015 unless unemployment rate and inflation reach a certain level after Operation Twist expires at year-end. The announcement triggered appetite for risky assets. The US dollar index retreated from 80 as a result. LME aluminum jumped to USD 2,148/mt during the European session, its highest since September 19. Trading volumes contracted slightly as longs were cautious towards buying at highs. Resistance remained strong at USD 2,150/mt. Finally, LME aluminum closed at USD 2,145/mt, up USD 33/mt or 1.56%. Latest LME aluminum inventories decreased 9,650 mt to 5,167,650 mt.

Extension of the Fed's bond buying programs will give a boost to market confidence. LME aluminum should struggle at USD 2,140/mt and fluctuate in the band of USD 2,120-2,160/mt on Thursday. The SHFE 1303 aluminum contract is expected to challenge resistance at RMB 15,400/mt, with prices between RMB 15,350-15,450/mt. Spot discounts are expected between RMB 0-40/mt. Traders will be in a hurry to move goods as aluminum prices have rebounded, while downstream producers and middlemen should show some buying interest, leaving overall trading stable.