SMM Morning Review – 2011/8/9 Aluminum Market

Stock and commodity prices slipped overnight due to investor panic caused by a historical downgrade of the AAA rating of US debt. Later during the day, Standard & Poor’s who produced the historical downgrade further announced that a one in three possibility exists for a second downgrade for US debt ratings during the next 6-24 months, and market panic further deteriorated as a result, with selloff sentiment surging and commodity and US stock prices falling. On the contrary, the US dollar and gold as safe havens climbed, with the US dollar index rising above 75 and London gold price hitting a historical high of USD 1,720.3/oz.

During initial trading hours in Europe, LME aluminum prices well consolidated at USD 2,400/mt and slowly fluctuated upward to hit USD 2,442.5/mt. However, after 22:00 Beijing time, as selloff speeded up, LME aluminum prices quickly fell below USD 2,400/mt and hit USD 2,383/mt, a new low since January 26th. At the tail of trading, LME aluminum prices narrowly fluctuated and finally closed at USD 2,394.8/mt, down USD 36.3/mt or 1.49%, showing a relatively slower downward pace compared with other metals prices. Total positions fell by 2,444 lots to 726,750 lots.

As short momentum remains strong, SMM expects LME aluminum prices to fluctuate between USD 2,350-2,410/mt on August 9th. Most active SHFE 1110 aluminum contract prices are expected to open below RMB 17,000/mt and fluctuate between RMB 16,600-17,100/mt. Spot premiums are expected to be RMB 100-300/mt over SHFE current-month aluminum prices. As the delivery date is approaching, some consumers will purchase in the SHFE aluminum market, therefore spot aluminum transactions will be sluggish.