SMM Morning Review - 2011/10/12 Aluminum Market

Slovakia vetoed the EFSF expansion plan overnight, Greece may not be able to receive the new round of 8 billion euro loan scheduled in early November, Standard & Poor’s downgraded ratings of 10 Spanish banks… With negative news continuously coming out, the European debt crisis seemed still far away from even alleviation. Though the euro kept its gains during the previous trading day, the bearish sentiment still prevailed in the market.

As a result, LME aluminum erased gains during Monday's trading and hit an intraday low of USD 2,200.3/mt on Tuesday October 11th. The metal slightly rebounded at the tail of trading and finally closed at USD 2,224/mt, down USD 31/mt or 1.37% from previous trading day. Total positions increased 8,478 lots to 832,466 lots.

The bearish market sentiment is expected to become even stronger after the US Senate approved the RMB bill to force China appreciate its currency. We expect LME aluminum to meet resistance at the 5-day moving average and fluctuate between USD 2,180-2,230/mt during today’s trading. The most active SHFE 1112 aluminum contract is expected to open lower and fluctuate between RMB 16,500-16,650/mt. Spot premiums are expected to narrow to RMB 20-70/mt over the SHFE current-month aluminum price as the current-month contract is going to be changed. Market supplies will remain slightly excessive.