SMM Morning Review - 2010/2/26 Aluminum Market

SHANGHAI, Feb. 26 (SMM) -- Yesterday, LME aluminum prices opened at USD 2,136/mt, with the highest level and lowest level at USD 2,142/mt and USD 2,074.2/mt, respectively, and finally prices ended at USD 2,097.5/mt. Total trading volumes reported 8,292 lots, and positions were 702,964 lots. LME aluminum inventories declined by 4,000 mt to 4,579,875 mt.

Yesterday, the Greece sovereign debt crisis was deteriorating, and although the EU attempted to maintain the stability of its members, the consensus with regard to how to resolve the debt crisis failed to be reached, and the contradiction intensified further after Germany announced that it has no support plan for Greece. Greek government took great efforts to defend itself, and said the Greece debt crisis was largely caused by the fact that Nazi Germany has looted large amounts of gold from Greece during the World War II. Meanwhile, the Greek government made a controversial currency swap transactions in 2001, putting the Greek government in an embarrassing position, and the time to resolve the Greece sovereign debt crisis was delayed as a result, further generating investor concerns recently. 

The US economic data released yesterday was lower than expected. The US Department of Commerce announced on Thursday that the durable goods orders in January rose by 3%, higher than expected, but the positive durable goods orders were mainly stimulated by soaring aircraft orders, while demand from other sectors was on a downward track during January. The US Department of Labor released that the initial applications for unemployment benefits increased by 22,000 to 496,000 last week after quarterly adjustment, which reversed the trend of significant declines in the applications for unemployment benefits since December 2009, generating investor concerns that the US job market will deteriorate further.

The US dollar index continued to move in the 80.5-81 range in view of intensifying struggles between long and short positions, and its trend remains uncertain before the US economic recovery stabilizes. Commodities prices stagnated, but the shortages of upward momentum in the US dollar index will exert positive impact on recent metals prices, and any downward movement in metals prices will be limited given positive expectations of economic recovery in 2010 and market confidence in demand recovery after March.

Recently, Chinese demand recovered slowly, which will depress metals prices, but the upward trend of metals prices in the long run remains unchanged, and the low-end prices will climb gradually with the approach of seasonal peak demand period. However, metals prices will continue to fluctuate recently, since long players were concerned over the possible negative impact from policies. SMM predicts SHFE 1005 aluminum contract will move in the RMB 16,600-17,000/mt range today.

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

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