SMM Morning Review - 2010/5/6 Aluminum Market

SHANGHAI, May 6 (SMM) -- Yesterday, the debt crisis in Euro zone re-surfaced, helping push up the US dollar index, and base metals prices moved lower generally, with LME nickel prices dropping by 11%. LME aluminum prices opened at USD 2,169/mt, with the highest level and the lowest level at USD 2,178/mt and USD 2,062/mt, respectively, but later rebounded slightly, with prices finally ending at USD 2,121/mt, down USD 42/mt compared with the previous trading day, or down 1.94%. Total trading volumes reported 164,586 lots, and total positions were 719,562 lots, up 2,037 lots. LME aluminum inventories declined by 11,475 mt to 4,518,075 mt.

Three people were killed in fire set during protests against deficit-cutting measures in Greece; European leaders warned on Wednesday that the euro zone debt crisis could spread like a bushfire beyond Greece; Moody's Investors Service has placed Portugal's Aa2 government bond ratings on review for possible downgrade, all three causing global stock markets and euro to plunge, and the euro hit a 13-month low as a result, helping push up the US dollar index to stand above 84. Base metals prices slumped in response led by a 11% drop in LME nickel prices. Most base metals prices rebounded later supported by growing purchases at lower prices, and LME aluminum prices also moved higher to above USD 2,100/mt after falling below this mark.   
 
Domestic market fundamentals show no signs of deteriorating, associated with the upcoming seasonal peak demand period for aluminum and growing expectations of higher electricity prices, SMM predicts SHFE three-month aluminum contract prices will receive strong support at RMB 15,700/mt, and will fluctuate around RMB 16,000/mt today, with special focus on the electricity price adjustment for domestic aluminum producers.    

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

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