SMM Morning Review - 2010/12/27 Aluminum Market

SHANGHAI, Dec. 27 (SMM) -- On December 25th, the People's Bank of China (PBOC) said that it will hike the benchmark interest rate by 25 basis points beginning December 26th, taking the one-year lending rate to 5.81% and one-year deposit rate to 2.75%. China's central bank chose to increase the interest rate during the Christmas holidays in an attempt to ease possible market speculation.

The US dollar index fluctuated narrowly on December 24th, and the index dipped to 80.333 after opening at 80.458, and finally closed at 80.474. The London Metal Exchange shortened the trading period before the Christmas holidays. LME aluminum prices slipped first but advanced later. LME aluminum prices fell gradually after opening at an intraday high of USD 2,445/mt, and later reversed some losses after dipping to USD 2,412/mt, and finally ended at USD 2,430/mt, down USD 2/mt compared with the previous trading day. Trading sentiment was lackluster, and LME aluminum inventories fell by 6,225 mt to 4,275,275 mt.    

SHFE aluminum prices advanced after opening slightly lower today, and overall financial markets may move on an upward track after negative impact from China's second interest rate increase is absorbed by the market, but SMM remains cautiously optimistic toward aluminum price trends given tight cash flows at the end of year.                 

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