SMM Morning Review - 2011/8/11 Aluminum Market

European and U.S. markets were overwhelmed with worries overnight due to escalating European debt crisis. Sources said earlier the European Executive Committee could neither confirm nor deny that deadline of Greek debt swap would be postponed until after 2020, which again led cautious sentiment among investors, limiting upward space of commodity prices. During the night on August 10th, pessimistic sentiment grew in the market due to possibilities that French AAA debt rating may be downgraded, with US stock prices plunging by over 4%, US dollar and gold surged on the contrary due to their risk haven function. The US dollar index climbed to near 75, and gold prices hit a historical high of USD 1,800/oz.

LME aluminum prices fell from a high for twice overnight with mainstream trading price falling to near USD 2,400/mt. During European trading hours, due to drastic increase of aluminum stocks by over 180,000 mt, LME aluminum prices quickly erased gains during Asian trading hours and fell to near USD 2,400/mt. However, with buying at lower prices by the longs, LME aluminum prices quickly rebounded. In the evening, due to worries towards spreading European debt crisis and climbing US dollar index supported by risk aversion sentiment, LME aluminum prices fell to USD 2,390/mt as a result of short selling. Finally closed price was USD 2,400.5/mt, down USD 10.5/mt or 0.44%. Total positions rose by 407 lots to 740,967 lots.

SMM expects aluminum prices to fluctuate between USD 2,360-2,430/mt on August 11th. Most active SHFE 1110 aluminum contract prices are expected open lower at RMB 17,500/mt and fluctuate between RMB 17,300-17,700/mt. As the delivery date is approaching, spot premiums are expected to continuously narrowing to RMB 30-130/mt over SHFE current-month aluminum prices. Purchasers are cautious during recent period due to frequent fluctuation of aluminum prices, and are purchasing only on an as-needed basis. Market sentiment is extremely low.