SMM Morning Review – 2011/7/5 Aluminum Market

The financial market closed for one day on July 4, American Independence Day. As Greek default risk lowered, the Euro rose for six consecutive days. However, the Euro temporarily fell due to market worries, after Standard & Poor’s warned overnight that new austerity measures of Greece will put the country in a selective default position,. The Euro quickly rebounded later as the pessimistic market sentiment waned. The US dollar index remained on a downward track, but the downward space of US dollar was limited as QE2 ended, helping the US dollar index stand steady above 74 points despite falling for six straight days.

LME aluminum initially fell to an intraday low of USD 2,488/mt overnight, but quickly rebounded due to strong support at USD 2,500/mt. Finally, LME aluminum prices closed at USD 2,515/mt, up USD 5/mt or 0.2%. Total positions were down by 8,257 lots to 682,996 lots.

It is estimated LME aluminum prices will fluctuate between USD 2,500-2,540/mt on July 5. Most actively-traded SHFE 1109 aluminum contract price is expected to break the RMB 17,400/mt level and fluctuate between RMB 17,300-17,410/mt. Limited supplies from goods holders will support spot aluminum prices, with premiums over SHFE current month aluminum price expected at positive RMB 10-50/mt. Market sentiment is expected to be active, given brisk buying interest by middlemen, despite downstream buyers' purchases on an as-needed basis.