SMM Morning Review – 2011/7/13 Aluminum Market

On July 12, US credit rating agency Moody’s downgraded Ireland’s credit rating from BAA3 to BA1 and maintained a negative outlook for the country’s rating, which indicated the European debt crisis had spread into Ireland. On the other side, debt default risk increased in the US since the country failed to reach an agreement for lifting its debt ceiling with the deadline approaching. Meeting minutes announced on July 12 for the FED meeting held during June 21-22 showed some FED officials were preparing to provide more easy money policies if the US economic recovery is too slow to ease the high unemployment rate and that inflation will slow down as expected. As a result, the US dollar index erased earlier gains and fell to 75.972.

During European trading hours, LME aluminum prices continuously rose and fluctuated at USD 2,500/mt overnight. After failing to break through the USD 2,500/mt level, LME aluminum prices finally closed at USD 2,494/mt, up USD 12/mt or 0.48%. Total positions increased by 9,322 lots to 694,512 lots.

Today LME prices are expected to fluctuate between USD 2,480-2,520/mt. Most active SHFE 1109 aluminum contract prices are expected to fluctuate between RMB 17,200-17,300/mt. Spot premiums are expected to be at positive RMB 40-90/mt over SHFE current-month aluminum prices. Though aluminum holders will actively move their goods, buyers are expected to be cautious. Market transactions are expected to be sluggish.