SMM Morning Review – 2011/8/5 Aluminum Market

European Central Bank announced on August 4th to maintain its interest rate at 1.5%, ending rate hikes starting in April. US Department of Labor announced new unemployment claims fell to 400,000 during the week from July 25th – 29th, slightly better than expected. However, the market was more concerned about spreading of the euro zone debt crisis from second tier to first tier countries, and with weak economic data from major economies, market demand expectation was significantly lowered, leading to selling-off of commodities. As a result, US stock prices, commodities prices plunged, and the US dollar index surged supported by stronger risk aversion sentiment to above the moving averages. The US dollar index finally closed at 75.336, up 1.92%.

LME aluminum prices maintained a falling trend during European trading hours overnight, hitting an intraday low of USD 2,475.8/mt. After a slight rebound at the tail of trading, LME aluminum prices finally closed at USD 2,496/mt, down USD 35.8/mt or 1.41%. Total positions fell by 1,443 lots to 721,245 lots.

SMM expects LME aluminum prices to keep falling and fluctuate between RMB 2,450-2,510/mt on August 5th. Most active SHFE 1110 aluminum contract prices are expected open lower and fluctuate between RMB 17,800-18,300/mt. Goods holders will actively move goods due to falling prices, and spot premiums are expected to be RMB 50-100/mt over SHFE current-month aluminum prices. Middlemen transactions will be relatively active.