SMM Morning Review – 2011/7/14 Aluminum Market

US FED president Bernanke implied overnight that more easing monetary policies will be provided due to weak US economy. Meanwhile, default risk increased in the US with no agreement reached for lifting the US debt ceiling while the deadline is approaching. Concerning this, Moody’s put US AAA ratings on review for downgrade. As a result, the US dollar index plummeted to 74.7, down 1.67%, with commodities and crude oil prices strongly rebounding at 22:00 Beijing time.

During European trading hours, LME aluminum prices quickly rebounded after reaching a low point of USD 2,473.5/mt overnight. However, upward space for aluminum prices was limited due to no improvement of the US economy. Since strong resistance existed at the 5-day moving average, LME aluminum prices finally closed at USD 2,516.3/mt, up USD 22.3/mt or 0.89%. Total positions increased by 3,323 lots to 697,835 lots.

SMM expects LME aluminum prices to fluctuate between USD 2,490-2,540/mt today. Most active SHFE 1109 aluminum contract prices are expected to fluctuate between RMB 17,350-17,450/mt. As the delivery date is approaching, spot aluminum premiums are expected to stay between positive RMB 40-90/mt over SHFE current-month aluminum prices. With sufficient supply but sluggish consumption, only a few purchases at lower prices are expected from the middlemen. Therefore, market transactions will be moderate.