SMM Morning Review - 2011/12/13 Aluminum Market

SHANGHAI, Dec. 13 (SMM) – The market optimism cooled overnight after the EU summit failed to provide a practical solution for the region’s debt crisis. The US dollar index climbed to 79.653 as a result of haven seeking, thereby weighing on commodities.

The LME aluminum stock surged further by over 120,000 mt to a record high. Bearishness on both the macro and fundamental sides caused LME aluminum to close USD 47.5/mt or 2.29% lower at USD 2,023.5/mt.

Mounting worries towards global economies may lead to stronger short selling. As such, SMM expects LME aluminum to slip further and fluctuate between USD 1,990-2,050/mt. The most active SHFE four-month aluminum contract is expected to gap lower near RMB 15,800/mt. Bargain hunting might show supported by high aluminum production costs. However, the contract may not be able to return to above the RMB 16,000/mt mark. The range for fluctuation is expected to be RMB 15,750-16,050/mt. Goods holders’ selling interest will be low after the SHFE current-month aluminum price dropped below RMB 16,000/mt and spot premiums over the current-month price are expected to expand to RMB 20-60/mt. The downstream buying interest will also be low, however.