SMM Morning Review - 2011/8/8 Aluminum Market

US Department of Labor announced on August 5th that non-farm employments rose by 117,000 in July, much higher than the expected 85,000. Un-employment rate of July also slightly fell to 9.1%, indicating an optimistic trend in the US employment market. However, panic sentiment among investors turned stronger due to worries towards a global economic recession given uncertainties of the European debt crisis. LME aluminum prices fell for a sixth consecutive day on August 5th with a 2.6% loss during the day. After hitting a low of USD 2,405/mt, LME aluminum prices slightly rebounded at the tail of trading to close at USD 2,431/mt, down USD 65/mt. Total positions rose by 7,949 lots to 729,194 lots.

Late on August 5th, the credit rating agency Standard & Poor’s downgraded US debt rating from AAA to AA+ for the first time in US history. As a result, panic sentiment in the market grew stronger due to worries towards a second recession in the country, and the US dollar index erased gains on the previous day to below 75, and SMM expects the US dollar index to keep falling and break 74 in the short term. LME aluminum prices are expected to keep falling and fluctuate between USD 2,360-2,430/mt on August 8th. Most active SHFE 1110 aluminum contract prices are expected to open lower and slip to fluctuate between RMB 17,000-17,450/mt. Spot premiums are expected to be RMB 100-300/mt over SHFE current-month aluminum prices supported by limited supplies. Wait-and-see attitude will remain present in the market.