SMM Morning Review - 2011/9/28 Aluminum Market

The active efforts by European leaders to seek solutions for a highly possible default by Greece helped calm investors overnight. Though later announced September Consumer Confidence Index in the US missed market expectation and indicated difficulties for consumer market to improve, the US dollar index was still dragged to an intraday low of 77.394 overnight. The index slightly rebounded at the tail of trading, but resistance at the 5-day moving average above was strong.

Supported by the drop in the US dollar index, LME aluminum broke through the 5-day moving average overnight and hit an intraday high of USD 2,256/mt before finally closing at USD 2,251.8/mt, up USD 39.8/mt or 1.8%. Positions for the metal increased 5,820 lots to 783,608 lots.

SMM expects LME aluminum to test the 5-day moving average today and fluctuate between USD 2,230-2,280/mt. The most active SHFE 1112 aluminum contract is expected to open slightly higher at above RMB 16,500/mt and attempt to test the 5-day moving average as it fluctuates between RMB 16,400-16,650/mt. Investors will gradually exit the market for risk aversion with the approaching National Day holiday. Downstream stock building has basically ended. The spot aluminum market will also turn quiet due to the coming holiday. Spot premiums are expected to be RMB 100-150/mt over the SHFE current-month aluminum price. Transactions will be sparse.