SMM Morning Review – 2011/8/25 Aluminum Market

Investor confidence climbed overnight with all US stock prices climbing after the US Department of Commerce announced July durable goods orders rose 4%, much higher than the 2% expectation. Meanwhile, as more investors expected US Fed to provide QE3, risk aversion capital successively exited gold markets with London gold prices falling by nearly 4% to USD 1,758.6/oz. However, as market sentiment remain cautious in the recent period, the US dollar index climbed at the tail of trading to 74.063, up 0.3%. LME base metals closed mixed.

LME aluminum prices rebounded following earlier dropping after release of strong durable goods orders data by the US, but stopped at USD 2,380/mt due to strong resistance. Later during the day, with the US dollar index climbing to above 74 and continuous high inventories, LME aluminum finally closed at USD 2,354.3/mt, down USD 25.8/mt or 1.08%, with transactions dropping by a huge 31%. Total positions rose by 1,706 lots to 740,684 lots.

SMM expects LME aluminum to struggle at the 5-day moving average and fluctuate between USD 2,340-2,380/mt on August 25th. Most active SHFE 1111 aluminum contract is expected to open lower near RMB 17,200/mt and fluctuate between RMB 17,150-17,350/mt. Spot premiums are expected to be positive RMB 180-230/mt over SHFE current-month aluminum prices. Goods holders are expected to actively move goods, but transactions are expected to remain sluggish as seasonal low-demand turned even weaker due to the approaching month-end.