SMM Morning Review - 2011/9/7 Aluminum Market

US ISM non-manufacturing index for August came out higher than both market expectation and in previous month, thereby slightly alleviating market worries towards weak European and US economies in the recent period while helping stock market trimming losses at the tail of trading. The US dollar index hit an intraday low of 74.675 earlier in the day as investors stayed away from the US dollar, but surged later on worries towards deterioration and spreading the European debt crisis to 76 before finally closing 0.78% higher at 75.868. The euro, in the contrary, fell to below USD 1.4.

LME aluminum reported a fourth losing day overnight. It rebounded at the beginning of trading with falling US dollar index, but only hit USD 2,399/mt due to strong resistance at USD 2,400/mt. The metal later erased earlier gains and hit an intraday low of USD 2,368.3/mt with rebounding of the US dollar index, and was followed with a slight rebound at the tail of trading supported by better-than-expected US non-manufacturing data. Finally closed price was USD 2,389/mt, down USD 2.3/mt or 0.09%. Total positions dropped by 717 lots to 736,430 lots.

SMM expects LME aluminum to test USD 2,400/mt and fluctuate between USD 2,370-2,410/mt today. Most active SHFE 1111 aluminum contract is expected to open slightly higher near RMB 17,300/mt and fluctuate between RMB 17,250-17,400/mt. Spot premiums are expected to be RMB 30-80/mt over SHFE current-month aluminum prices as market sentiment and consumption remains weak. Transactions will be limited despite sufficient supply.