SMM Morning Review - 2012/2/2 Aluminum Market

SHANGHAI, Feb. 2 (SMM) – Gains in January manufacturing indexes of China, Europe and the US boosted market confidence and in turn dragged the US dollar index below 79 overnight, helping LME aluminum breaking through the 5-day moving average and closing USD 23/mt or 1.02% higher at USD 2,271/mt. Total positions for the metal plunged 14,267 lots due to short covering.

LME aluminum prices have been volatile this week as the European debt crisis remains unsolved and US employments, which are expected to considerably trail estimate, may erode support from gains in PMI data of major economies. SMM expects LME aluminum to test support at the 5-day moving average and move between USD 2,250-2,300/mt during today’s trading. The most active SHFE three-month aluminum contract is expected to test resistance at the 5-day moving average and hover between RMB 16,250-16,350/mt. Traders in the spot market will actively move goods at discounts of RMB 100-150/mt over the SHFE current-month aluminum price in the face of sufficient supply. The downstream buying interest will be low, however, due to limited stock replenishments.