SMM Morning Review - 2012/7/20 Aluminum Market

SHANGHAI, Jul. 20 (SMM) – The US dollar index was pressured at 83 as a string of weak economic data from the United States – new unemployment claims climbed sharply, NAR existing home sales dropped 5.4% after seasonal adjustment, the Philadelphia Fed manufacturing index weakened further to negative 12.9 – and increasing downside pressure on the Chinese economy caused monetary easing expectations to heat up. LME aluminum closed up USD 35.8/mt or 1.88% at USD 1,941/mt, down slightly from USD 1,946/mt, its intraday high. Aluminum inventories at LME-bonded warehouses dropped 5,950 mt to 4,802,550 mt.

Expectations for stimulus in China, the United States as well as other nations will help aluminum prices stabilize. LME aluminum is expected to test support at the 30-day moving average after returning above the price. The moving band should be USD 1,915-1,950/mt. The most actively traded SHFE aluminum contract for October delivery is expected to start higher near RMB 15,625/mt and hover between RMB 15,575-15,675/mt as cautious longs limit upside space. Spot discounts of RMB 40-80/mt over current-month SHFE aluminum prices should be seen as demand stays weak. Pre-weekend stock replenishments will also be limited. Trading should remain light.