SMM Morning Review - 2010/1/8 Aluminum Market

SHANGHAI, Jan. 8 (SMM) -- Yesterday, LME aluminum prices opened at USD 2,370/mt, with highest and lowest level at USD 2,388.8/mt and USD 2,307/mt, respectively, and finally prices ended at USD 2,309.8/mt.  Total trading volumes reported 8,875 lots, and positions were 693,236 lots. LME aluminum inventories declined by 4,450 mt to 4,615,400 mt.

The US Department of Labor released on Thursday that the number of initial application for unemployment benefits increased to 434,000 last week, lower than the estimate of 447,000. Tonight, the US will release non-farm employment data, and investors adopted a cautious attitude, and Dow Jones Index fluctuated. However, LME futures market pared previous strong upward momentum, since yesterday the State-owned Assets Supervision and Administration Commission urged China's state firms must be careful when investing in the property, stock and futures markets, and China's central bank auctioned RMB 60 billion of three-month bills at a yield of 1.3684%, higher than previous levels, triggering concerns of tightening lending, and SHFE markets plunged after opening high as a result, which in turn resulted in the upward movement in LME futures prices.

Market concerns increased after previous strong optimistic sentiment, and expectations of lending restrictions strengthened as well, and base metals prices are expected to experience short-term corrections. In addition, the cold weather in China reported no improvement, so special attention should be paid to transportation of coal for power generation and electric power supply. SMM predicts SHFE 1004 aluminum contract will move in the RMB 17,500-17,800/mt range today.

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