SMM Morning Review - 2011/7/25 Aluminum Market

SHANGHAI, Jul. 25 (SMM) -- As the White House failed to reach a valid agreement to lift US debt ceiling with the deadline approaching, the US dollar index fluctuated at 74 on July 22nd. Later during the day, after optimistic sentiment for Greek debt crisis cooled, the US dollar index slightly rose and finally closed at 74.24, up 0.27%.

On July 22nd, after spot aluminum supply turned tight in China, the world’s largest aluminum consumer, longs in the LME aluminum market regained confidence, and as NYMEX crude oil prices rose to test USD 100/bbl, LME aluminum prices surged during the tail of Asian trading hours. During European trading hours on July 22nd, LME aluminum prices led base metals prices to gain and broke through the 60-day moving average. At the tail of trading, a stronger US dollar caused LME base metal prices to trim previous gains, but only LME aluminum prices maintained the rising trend, and finally closed at USD 2,590/mt, up USD 54/mt or 2.13%. Total positions increased by 7,333 lots to 4,392,550 lots.

SMM expects LME aluminum prices to test support at the 60-day moving average and fluctuate between USD 2,570-2,610/mt today. As LME aluminum prices closed much higher last Friday, most active SHFE 1110 aluminum contract prices are expected to open higher and fluctuate between RMB 17,600-17,800/mt. Capital pressure is increasing among enterprises at the month-end, and spot aluminum consumption will be even more sluggish. However, spot aluminum prices will be firm given limited supply, with premiums expected at positive RMB 50-100/mt over SHFE current-month aluminum prices.