SMM Morning Review - 2011/9/22 Aluminum Market

After US Fed launched its USD 400 billion operation twist to buy in long-term debt and sold out short-term debt, which hugely damped investor confidence, the Dow Jones Industrial Average index plunged 2.5%. US crude oil prices also plummeted, with the crude contract for delivery in November falling below USD 85/bbl. Before this operation twist is announced, Moody’s already downgraded credit ratings for Bank of America, Citibank as well as Wells Fargo, and Standard & Poor’s downgraded ratings for seven Italian banks.

The positive economic data from China helped LME aluminum prices open at USD 2,323/mt overnight. However, the metal dropped with other base metals to an intraday low of USD 2,288/mt after US Fed announced its operation twist. After rebounding for a short while following release of better-than-expected existing home sales data from the US, the metal finally closed at USD 2,330/mt.

LME aluminum opened lower today due to strengthening US dollar, and is expected to fluctuate between USD 2,270-2,320/mt during the day. Most active SHFE 1111 aluminum contract is expected to fluctuate between RMB 17,000-17,200/mt with strong support at the lower end price of RMB 17,000/mt. Downstream demand is expected to be moderate, but since goods holders are unwilling to sell at lower prices, spot premiums are expected to be RMB 100-140/mt over SHFE current-month aluminum price.