SMM Morning Review - 2012/2/13 Aluminum Market

SHANGHAI, Feb. 13 (SMM) – Resistance from extreme right wing leaders on the new austerity plan in Greece last Friday again ignited investor worries towards a Greek default, pushing the US dollar index back above 79 and leading to short selling for commodities and stocks. LME aluminum for three-month delivery hit an intraday low of USD 2,236/mt and pared losses supported by short covering before closing down USD 31/mt or 1.36% at USD 2,251/mt. Losses in aluminum were relatively moderate compared with other base metals in LME.

Though Greece finally approved its new austerity plan, securing the second bailout, downgrades for 34 Italian banks by Standard & Poor’s mean the Greek debt crisis remains a huge risk source. As such, SMM expects LME three-month aluminum to struggle at USD 2,250/mt and move between USD 2,230-2,290/mt during today’s trading. The most active SHFE aluminum contract for delivery in May is expected to move between RMB 16,250-16,350/mt. Spot discounts over the SHFE current-month aluminum contract are expected to narrow to RMB 40-90/mt as the delivery date nears. Supply will be sufficient but traded volume will be limited.