SMM Morning Review - 2012/7/16 Aluminum Market

SHANGHAI, Jul. 16 (SMM) – China’s first half GDP grew 7.8% YoY, which is in line with expectations and higher than the annul target. Loose monetary policies should be maintained. The much better-than-expected 0.1% MoM growth of June PPI in the United States further boosted investor confidence, pushing LME aluminum above USD 1,900/mt to close up USD 23/mt or 1.22% at USD 1,909/mt/ Positions added 8,480 lots to 720,551 lots. Strong resistance at the 10-day moving average had kept LME aluminum below.

As investor confidence fades, aluminum will have limited upward space. LME aluminum is expected to test support at USD 1,900/mt and move within USD 1,890-1,920/mt. The most active SHFE aluminum contract for October delivery should start higher near RMB 15,520/mt and struggle near the 5-day moving average as it hovers within RMB 15,480-15,580/mt. Spot discounts should narrow to RMB 10-50/mt this last trading day for the current-month contract. Spot aluminum trading will remain light.