SMM Morning Review - 2012/7/6 Aluminum Market

SHANGHAI, Jul. 6 (SMM) – Interest rate cuts by Chinese and European central banks overnight were overshadowed by ECB President Mario Draghi’s pessimistic remarks towards the euro zone economy, pressing down the euro and pushing the US dollar index near 83. LME aluminum started at USD 1,956.8/mt and closed down USD 11/mt, or 0.56%, at USD 1,945/mt, after slipping to USD 1,929/mt as the US dollar strengthened. Transacted contracts added 3,991 lots to 14,550 lots and positions added 13,322 lots to 707,309 lots. Latest LME aluminum stocks were up 3,750 mt at 4,809,525 mt.

The rate cuts in China and Europe are meant to boost slowing economic growth, but also added to the appeal of the safe-haven US dollar to weigh on base metals. The US non-farm payroll data today will exert a significant impact on the US dollar. LME aluminum is expected to start lower and move between USD 1,930-1,970/mt. The most active SHFE aluminum contract already showed a lack of momentum yesterday, only temporarily hitting RMB 15,790/mt, and is expected to move weakly between RMB 15,600-15,750/mt today as latest rate cuts can hardly reverse the fragile market confidence. Spot discounts should be RMB 20-60/mt today.