SMM Aluminum Market Morning Review (2012-10-18)

SHANGHAI, Oct. 18 (SMM) – The US Department of Commerce released overnight that the US housing starts surged 15% in September to an annual rate of 872,000, the highest in four years. The figure was far better than estimates, raising expectations for robust demand and driving the US dollar index below 79. In response, LME aluminum staged a strong rebound to a high of USD 1,995.3/mt, breaking through the 60-day and 5-day moving average. However, LME aluminum pared some gains at the tail of trading as longs were cautious towards buying. Finally, LME aluminum ended the day up USD 29/mt or 1.48% at USD 1,987/mt. Latest LME aluminum inventories were down 7,550 mt to 5,058,250 mt.

Concerns over the European debt crisis and slowing Chinese economy will curb gains brought by positive housing starts in the US. LME aluminum should meet strong resistance at USD 2,000/mt and move between USD 1,955-1,995/mt on Thursday. The SHFE 1212 aluminum contract is expected to open slightly higher at RMB 15,490/mt on Thursday, with prices between RMB 15,465-15,565/mt. Spot discounts are expected between RMB 80-120/mt as consumption should be sluggish.