SMM Morning Review – 2011/7/28 Aluminum Market

US Department of Commerce announced on July 27 that June durable goods orders fell 2.1% MoM, which was a second fall during recent three months, and was opposite from the expected 0.3% gain. This indicated a dim future for the US industry. Meanwhile, as no valid agreement has been reached, investor confidence fell due to worries towards a US default. As risk aversion sentiment grew, the US dollar index rallied significantly overnight to above 74 and finally closed at 74.101, up 0.77%.

LME aluminum prices closed USD 4.5/mt lower overnight from previous trading day as a result of rebounding US dollar index and weak US manufacturing data. LME aluminum prices hit USD 2,675.3/mt, a new high since June 9th during Asian trading hours, and closed only slightly lower at USD 2,638/mt supported by significantly increased transactions, down 0.17%. Total positions increased by 5,295 lots to 687,255 lots.

SMM expects LME aluminum prices to continuously fluctuate between USD 2,620-2,680/mt on July 28. Most active SHFE 1110 aluminum contract prices are expected to open slightly higher and fluctuate between RMB 18,200-18,500/mt. Downstream purchases will be rare during the last two days of July due to month-end capital pressure. As goods holders are unwilling to move goods, spot premiums are expected to be positive RMB 30-80/mt over SHFE current-month aluminum prices. Market transactions will be extremely limited.