SMM Morning Review – 2011/7/18 Aluminum Market

On July 15, the US Department of Labor announced that June CPI was down 0.2% MoM, worse than the expected 0.1%. Later US FED announced June industrial production growth was 0.2%, lower than the expected 0.3%. As weak US economic data and spreading European debt crisis dampened investor risk appetite, the US dollar index gained support at 75 and rose to test the 5-day moving average. However, upward space for the US dollar index was limited by the slowing economic recovery in the US. The US dollar index finally closed at 75.146, slightly up by 0.03%.

During European trading hours, as the US dollar index fluctuated at high levels, LME aluminum prices fell below USD 2,500/mt and hit the lowest USD 2,473/mt of the day. While LME aluminum inventories were continuously decreasing during recent two months, a slight increase was seen on July 15 which dampened upward momentum in LME aluminum prices. As a result, LME aluminum prices finally closed at USD 2,498.8/mt, down USD 7.3/mt or 0.29%. Total positions hugely decreased by 13,689 lots to 681,650 lots.

SMM expects LME aluminum prices to fluctuate between USD 2,470-2,520/mt on July 18. Most active SHFE 1109 aluminum contract prices are expected to open lower and fluctuate between RMB 17,400-17,500/mt. SHFE 1108 aluminum contracts became the current-month contracts, and spot premiums over SHFE current-month aluminum prices are expected to be positive RMB 0-50/mt. As spot aluminum prices will stand steady at current levels, the wait-and-see attitude will remain strong.