SMM Morning Review: LME aluminum should move with in USD 1,850-1,880/mt on 23rd May

US Federal Reserve Chairman Bernanke’s testimony to the congress overnight was in support of QE3 to propel US economy. However, Bernanke also said that asset buying may be scaled back later this year if economy improves further. The minutes of April policy meeting indicate intense debate among Fed officials over whether bond purchases should be curtailed. Later, optimistic sentiment from continuation of easing monetary policy in the short term faded. This helped the US dollar index hit a fresh high for the year following plunge earlier, tempering gains of commodity prices. LME aluminum broke through the 30-day moving average to a high of USD 1,884.5/mt during the European session, but retreated from the 30-day moving average at the tail of trading. Finally, LME aluminum ended the day up 1.25% at USD 1,879/mt. Latest LME aluminum inventories decreased 7,475 mt to 5,218,175 mt.

The light metal will pare some of its earlier gains due to a firm US dollar and as preliminary manufacturing index is imminent. LME aluminum will be capped under USD 1,880/mt and move within a USD 1,850-1,880/mt price range on Thursday. SHFE 1308 aluminum contract is expected to open at RMB 14,630/mt, with prices between RMB 14,570-14,650/mt. In spot market, supply and demand will hold stable, with spot discount of RMB 20-60/mt expected over SHFE 1306 aluminum contract prices.