SMM Morning Review - 2011/9/9 Aluminum Market

With British and European central banks’ decisions to keep interest rates unchanged and European Central Bank President Trichet’s warning against high inflation pressure, increasing economic risk and a huge dial-back in economic growth in the euro zone on September 8th, the euro plunged to USD 1.3872, a new low since July 12th, while the US dollar index stood back above 76. Later during the day, the US Department of Labor announced that new unemployment claims surged unexpectedly to 414,000 during previous week, indicating unemployment rate remained high, and US Fed president Bernanke did not mention any economic stimulation policy either during later speech, which caused US stock prices to close lower. Base metals only slightly trimmed gains during European trading hours, however, with announcement of employment aid package by US President Obama.

Following fluctuation near USD 2,400/mt, LME aluminum hit an intraday high of USD 2,438/mt at the tail of trading with higher investor confidence following announcement of employment package by US President Obama. The metal only closed USD 14/mt or 0.58% higher at USD 2,419/mt, however, due to falling stock prices. Total positions increased 8,503 lots to 753,539 lots.

SMM expects LME aluminum to fluctuate between USD 2,400-2,440/mt on September 9th. Most active SHFE 1111 aluminum contract is expected to open near RMB 17,450/mt and fluctuate between RMB 17,380-17,520/mt. Spot premiums over SHFE current-month aluminum prices are expected to be RMB 10-60/mt supported by stock building before the Chinese Mid-Autumn Festival at some downstream enterprises. However, transactions are not likely to see huge increase as it remains buyers’ market.