SMM Moring Review - 2012/2/7 Aluminum Market

SHANGHAI, Feb. 7 (SMM) – LME aluminum stocks surged by over 30,000 mt overnight to above 5 million mt, damping market sentiment. Greece failed to agree on an austerity plan, postponing the reform meeting until today as it seeks financial aid. A rebound in worries towards Greek defaults weighed on the euro and induced losses in commodities. LME aluminum positions dropped 4,500 lots during European trading due to profit taking by longs, dragged LME aluminum price to USD 2,209.5/mt. Though the euro recovered losses at the tail of trading, high stocks still led to a USD 37.5/mt or 1.66% drop in LME aluminum price, which closed at USD 2,118/mt.

Cautiousness will be seen in today’s markets as Greeks vote over their austerity plan. LME aluminum is expected to move between USD 2,180-2,250/mt during today’s trading as it tests support at USD 2,200/mt. The most active SHFE three-month aluminum contract is expected to open lower below RMB 16,200/mt and move between RMB 16,150-16,250/mt as support at the 20-day moving average is tested. Limited recovery will be seen in aluminum consumption and weakness in the futures market can hardly boost trader confidence. As such, spot aluminum is expected to trade at discounts of RMB 50-100/mt over the SHFE current-month aluminum price. Traded volume will be light.