SMM Morning Review – 2011/7/20 Aluminum Market

As default risk rose in Greece, market sentiment turned sluggish. In order to prevent escalation and contagion of the debt crisis, German central bank and European Central Bank decided to convene an emergency meeting this Thursday and a bailout plan is expected for Greece. As a result, the Euro gained support and rebounded to test 1.42. In the evening on July 19, US Department of Commerce announced that housing starts in June increased by 14.6% to a new high of 629,000 since January, which was much higher than the expected 575,000. As a result, investor risk appetite increased, with US dollar index erasing earlier gains and falling below 75 several times overnight. At the tail of trading, the US dollar index slightly rebounded and finally closed at 75.101, down 0.28%.

SMM expects LME aluminum prices will rise and test the 60-day moving average and fluctuate between USD 2,550-2,600/mt on July 20. Most active SHFE 1110 aluminum contract prices are expected to open higher above RMB 17,700/mt and fluctuate between RMB 17,700-17,900/mt while moving towards RMB 18,000/mt. Tight supply of spot aluminum is not likely to improve in the short term. Though aluminum consumption still lags behind, goods holders will keep their quotes firm, and spot premiums are expected to be maintained between positive RMB 30-80/mt over SHFE current-month aluminum prices. Wait-and-see attitude will be strong due to different price expectations between suppliers and buyers.