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SMM Morning Review - 2010/2/22 Aluminum Market
Feb 22,2010 13:51CST
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SHANGHAI, Feb. 22 (SMM) -- On February 19th, LME aluminum prices opened at USD 2,100/mt, with the highest level and lowest level at USD 2,142/mt and USD 2,069.8/mt, respectively, and finally prices ended at USD 2,139/mt. Total trading volumes reported 7,647 lots, and positions were 697,754 lots. LME aluminum inventories declined by 7,025 mt to 4,598,650 mt.

The US Federal Reserve announced to raise the discount rate by 0.25 basis points on February 18th, an indication of transformation of loose monetary policy conducted by Bernanke to weather the financial crisis. Last week, the US economic data was positive, stimulating commodity prices to rebound. Federal Reserve Bank of New York released on February 16th that the growth of manufacturing activity accelerated in New York during February. The US Department of Commerce announced on February 17th that the housing starts in January increased by 2.8% on a monthly basis to an annual rate of 591,000 units after quarterly adjustment, hitting a record high since July 2009. The US Conference Board announced on February 18th that the US leading economic index in January rose by 0.3%, a growth for ten consecutive months, indicating the US economy has recovered steadily.

However, the negative impact from commodity price increases also emerged. The US Department of Labor announced on February 18th that the US producer price index (PPI) in January increased by 1.4% on a monthly basis after quarterly adjustment. Although the US CPI in January declined by 0.1% on a monthly basis, helping reduce market concerns over inflation, rapid growth in commodity prices will affect economy negatively, which serve as a major reason for Bernanke’s move to adjust loose monetary policy. In this context, how to limit the upward momentum for commodity prices driven up by capital liquidity will likely become the focus of all countries in 2010, and how to restrict the rapid growth in commodity prices also becomes extremely sensitive. 

The significant growth in commodity prices boosted market confidence, and commodity prices are expected to rise further in the short term. SHFE aluminum contracts prices soared but later slipped today, but SHFE 1005 aluminum contract prices received strong support at RMB 17,000/mt stimulated by optimistic sentiment with regard to price outlook, and SHFE 1005 aluminum contract prices will likely move in the RMB 17,000-17,500/mt range today.

To contact the writer on this report: angelawang@smm.cn

 

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