SMM Morning Review - 2011/11/9 Aluminum Market

The Italian parliament approved the country’s budget plan for 2012 overnight. The country’s Prime Minister Berlusconi failed to win a majority of votes, and said later that he would resign after austerity measures pledged to the European Union were approved. This eased investor worries towards Italian debt woes. However, the market sentiment was still slightly bearish before final results were announced, weighing on metals prices.

After dipping to the intraday low of USD 2,103/mt, LME aluminum rebounded and recovered the 5-day moving average amid progress made in Italy and strong performance of crude oil. The metal finally closed at USD 2,150.3/mt, up USD 24.5/mt or 1.15%. Total positions decreased 2,734 lots to 889,961 lots. The latest LME aluminum stock slipped 2,900 mt to 4,543,575 mt.

Investors’ focus today will be China’s CPI in October. Investors may receive a boost in confidence with optimistic expectations for China’s inflation pressure. SMM expects LME aluminum to test support at the 5-day moving average and fluctuate between USD 2,130-2,170/mt. The most active SHFE aluminum contract for delivery in January 2012 is expected to open slightly higher above RMB 16,300/mt and fluctuate between RMB 16,260-16,380/mt. Spot supply will be excessive and spot discounts over the SHFE current-month aluminum price are expected to widen. SMM expects spot aluminum to be traded at discounts of RMB 40/mt to premiums of RMB 10/mt over the SHFE current-month aluminum price.