SMM Morning Review - 2011/9/29 Aluminum Market

Investors’ worries towards the European debt crisis soared again overnight due to divisions among European leaders on efforts to prevent Greece from bankruptcy . Later, the US Department of Commerce said August durable goods orders fell unexpectedly by 0.1% from July, which followed slips in previous two months, indicating severe challenges for a recovery in US industrial production. As a result, the US dollar index climbed during European trading hours as investors dashed to the safer US dollar. The index returned to above the 5-day moving average and finally closed at 78.147, up 0.49%.

LME aluminum only hit USD 2,263/mt overnight as the strong US dollar eroded upward momentum of the metal. It later dropped to an intraday low of USD 2,198/mt due to increased short selling on weak US economic data, and finally closed at USD 2,201/mt, down USD 50.8/mt or 2.25% from previous trading day. Positions of the metal increased over 20,000 lots during the day.

After the US dollar index returned to the 78 mark, LME aluminum is expected to encounter strong resistance at USD 2,200/mt during today's trading. SMM expects LME aluminum to test USD 2,155/mt today and fluctuate between USD 2,155-2,205/mt. The most active SHFE 1112 aluminum contract is expected to open much lower today and fluctuate between RMB 15,870-16,520/mt. Spot premiums over the SHFE current-month aluminum price are expected to be RMB 170-220/mt due to strong wait-and-see sentiment among goods holders with the approaching National Day holiday. Purchases by downstream will be rare due to capital pressure at quarter’s end. Transactions will be sparse as a result.