SMM Morning Review - 2011/12/19 Aluminum Market

SHANGHAI, Dec. 19 (SMM) – The US dollar index dropped below 80 last Friday after the latest CPI date showed US inflation pressure stabilized in November. Investors’ risk appetite stayed depressed, however, amid concerns of possible downgrades for European countries. LME aluminum only gained USD 17/mt or 0.86% at USD 2,004/mt last Friday as the cautious market sentiment prevailed.

As the Christmas Day nears, cautious European and US investors are expected to exit the aluminum market, thereby alleviating shorting pressures. As such, SMM expects LME aluminum to test support at the 5-day moving average and fluctuate between USD 1,995-2,035/mt. The most active SHFE three-month aluminum contract is expected to move between RMB 15,750-15,875/mt as capital pressure remains strong and longs lack confidence. The SHFE current-month will stagnate near RMB 16,000/mt but spot aluminum will trade at discounts between RMB 0-30/mt over the contract due to weak downstream demand.