SMM Morning Review - 2012/6/13 Aluminum Market

SHANGHAI, Jun. 13 (SMM) – Greek debt yields surged to new highs, with 18 banks being downgraded. The Greek election is also near. European factors continued to stimulate risk aversion. LME aluminum met strong resistance at and stayed below the 5-day moving average, dropping to a low of USD 1,961/mt, a new low of this year. Transacted contracts contracted to near 9,000 lots due to cautious trading. The light metal finally settled down USD 4/mt or 0.2% at USD 1,970/mt. Total positions decreased 5,860 lots to 743,670 lots. Latest LME aluminum stocks were down 11,575 mt at 4,848,625 mt.

Worries towards a possible Greek euro exit reignited before the Greek election, so risk aversion will remain strong. Aluminum prices therefore will remain soft. LME aluminum is expected to test pressure at the 5-day moving average and move between USD 1,960-1,990/mt. The most active SHFE aluminum contract for September delivery should open near RMB 15,850/mt and hover narrowly between RMB 15,800-15,900/mt. Supply remains excessive in the spot market but most deals will be done near current-month SHFE aluminum prices. Both premiums and discounts will remain within RMB 20/mt. Deals will be limited.