SMM Morning Review – 2011/8/17 Aluminum Market

The Federal Statistical Office of Germany announced on August 16th Tuesday that GDP growth of the second quarter fell to 0.1%, which was much lower than market expectations, indicating a dim future for European top economy. It also added to risks of spreading of the European debt crisis. Meanwhile, no practical solution was reached during a summit between France and Germany, which led to market worries towards global economic recovery. Later during the day, the US Department of Commerce announced new house starts in July were eroded by 1.5% to an annualized 604,000, which was still an unhealthy level. This was followed by a better-than-expected 0.9 industrial output growth in July as released by US FED. However, market failed to regain confidence despite of positive FED data, with most base metals losing overnight. The US dollar index on the contrary closed higher above 74.

LME aluminum prices fluctuated at low levels during overnight due to continued market worries towards global economic recovery and another aluminum stock increase of over 20,000 mt. Finally closed price was USD 2,365.5/mt, down USD 14/mt or 0.59%. Total positions rose by 5,626 lots to 751,438 lots.

SMM expects LME aluminum prices to test low-end support and fluctuate between USD 2,365-2,390/mt on August 17th. Most active SHFE 1111 aluminum contract prices are expected to open lower near RMB 17,200/mt and fluctuate between RMB 17,000-17,400/mt. Spot premiums are expected to be positive RMB 150-250/mt over SHFE current-month aluminum prices as goods holders are unwilling to sell at low prices. Aluminum consumers are expected to be cautious, and market transactions will be slightly sluggish.