SMM Morning Review - 2011/10/19 Aluminum Market

SHANGHAI, Oct. 19 (SMM) – Since China’s GDP growth during the third quarter stayed high above 9%, its tight monetary policies are expected to continue until the CPI growth drops below 6%. This will add to the already strong capital pressure among Chinese businesses, which in turn will lead to a weaker Chinese demand for metals. Meanwhile, pessimism towards the euro zone debt crisis still exists due to limited progress made on solving the issue.

LME aluminum struggled near USD 2,200/mt at initial trading hours overnight. After hitting an intraday low of USD 2,181/mt, the metal recovered losses at the tail of trading with climbing US stock prices, and finally closed at USD 2,210/mt, up USD 4.3/mt or 0.19% from previous trading day. Total positions increased 4,880 lots to 851,925 lots.

SMM expects LME aluminum to meet strong resistance at the 5-day moving average amid investor worries towards the European debt crisis. The most active SHFE 1112 aluminum contract is expected to struggle near RMB 16,500/mt. Spot premiums over the SHFE current-month aluminum price are expected to be RMB 30-80/mt. Market transactions will remain limited.