SMM Morning Review - 2012/6/19 Aluminum Market

SHANGHAI, Jun. 19 (SMM) -- Greek election results motivated early Asian trading, but the market soon focused on whether the new government can improve Greece's debt problem and optimism gradually dissipated, and with Spain's 10-year bond yields climbing to more than 7% to further exacerbate the worries over the debt of Europe, LME aluminum turned to losses in the European session. In some regions of China preferential power rates are discussed to encourage aluminum plant to resume production. Output growth will weigh on aluminum prices, and short selling pressure sent LME aluminum to USD 1,915.3 /mt, a fresh low of the year. A weak late rebound helped it finally close at USD 1,928.3/mt, down USD 7/mt, or 0.36%, extending the losing streak to the seventh trading day. Total positions added 3861 lots to 743,087 lots. LME aluminum inventories increased 2,050 mt 4,849,600 mt.

Strengthening European debt worries, the G20 summit and the Fed interest rates meeting led to a strong wait-and-see market sentiment. In case of a lack of substantive supportive policies, the aluminum market will maintain the downward pattern. LME aluminum will face strong pressure at USD 1,950mt and move between USD 1,900-1,950/mt. The most active SHFE 1209 aluminum contract is expected to open lower at RMB 15,850/mt, test RMB 15,800/mt and hover between RMB 15,800-15,880/mt. Preferential power rate rumors have led to strong bearishness in the aluminum market. The selling interest is high but buying weak. Spot premium and discounts should both stay within RMB 20/mt. Trading will remain light.