SMM Morning Review - 2011/9/16 Aluminum Market

SHANGHAI, Sept. 16 (SMM) – The US Department of Labor said on September 15th that August Consumer Price Index rose 0.4 percent from previous month with a growth doubling estimates, indicating speeding up inflation. New unemployment claims during the week ended on September 10th surged unexpectedly to 428,000. Later announced August industrial production rose 0.2% MoM, but was far less than the 0.9% growth in July, indicating stagnation in this sector. These all reflected a weak US economy.

The statement by the Federal Reserve and central banks of Europe, England, Japan and Switzerland to give European banks ample access to dollars eased concerns about ripple effects of Greece's debt crisis, thereby boosting investor appetite with US stock prices closing higher on a fourth day and the US dollar index falling 0.73% to 76.291 in the contrary.

LME aluminum broke through USD 2,370/mt overnight supported by weakening US dollar, and hit an intraday high of USD 2,388/mt following the statement by 5 large central banks to inject US dollar liquidity to European banks. The metals failed to break through further due to strong resistance at the 20-day moving average, and finally closed at USD 2,379.8/mt, up USD 17.8/mt or 0.75%. Total positions dropped sharply by 15,037 lots to 761,863 lots.

SMM expects LME aluminum to test the 20-day moving average and fluctuate between USD 2,360-2,400/mt. Most active SHFE 1111 aluminum contract is expected to open at above RMB 17,350/mt and fluctuate between RMB 17,350-17,450/mt. Spot premiums are expected to be RMB 70-120/mt after SHFE 1110 became current-month contract. Spot price may return to RMB 17,700/mt.