LME aluminum to hover between USD 1,970-2,000/mt: SMM Morning Review

Amid early strong interest rate cut expectations, the PBOC announced Thursday evening to cut one-year deposit and loan benchmark rates by 0.25 percentage point, boosting market confidence. During European trading, LME aluminum got over early weakness and climbed with other metals, breaking through the 5-day moving average and touching a high of USD 2001/mt. However, Fed President did not imply easing monetary policy as market expected, that, coupled with Fitch Ratings’ three-level cut on Spain’s credit ratings, rekindled worries towards the global economy, eroding most of LME aluminum’s early gains. The light metal eventually closed at USD 1,988/mt, up USD 7/mt or 0.35%, Total positions surged 13,917 lots to 739,794 lots. Latest LME aluminum stocks plunged 28,750 mt to 4,875,375 mt.

Spain’s credit ratings saw a heavy cut and US monetary easing expectations cooled, largely weakening support from China’s interest rate cuts. LME aluminum is expected to stay in the recent band, will meet strong pressure at the 10-day moving average above and hover between USD 1,970-2,000/mt. The most active SHFE aluminum contract may open near RMB 15,910/mt, see its mainstream trading band climbing a little bit and fluctuate between RMB 15,900-15,970/mt. Domestic liquidity easing will slightly improve the spot aluminum market confidence. Near the weekend, stock replenishments at low prices will be seen and deals will rise slightly while supply is abundant. Spot discounts are expected within RMB 30/mt and premiums within RMB 10/mt.