SMM Aluminum Market Morning Review (2012-10-30)

SHANGHAI, Oct. 30 (SMM) – Spiraling bond yields in Spain and Italy aggravated borrowing costs and turned investors to the safety of the US dollar. The US dollar index was firm above 80 overnight as a result. The US economic data was mixed. Trading was even thinner as the US stocks market was closed on Monday and Tuesday because of the Hurricane Sandy. Investors are eyeing the US nonfarm payrolls due this Friday. LME aluminum extended losses in the European session. With high inventories and a firm US dollar, longs exited the market after taking profits, causing LME aluminum to tumble to a low of USD 1,887/mt, a two-month low. LME aluminum regained some losses at the tail of trading before finally ending the day down USD 19.8/mt or 1.03% at USD 1,905/mt. Latest LME aluminum inventories increased by 8,200 mt to 5,060,825 mt.

Aluminum prices will extend losses as investors will try to avoid risks ahead of the release of the US nonfarm payrolls on Friday. LME aluminum should struggle at USD 1,900/mt and move between USD 1,880-1,910/mt on Tuesday. The SHFE 1212 aluminum contract is expected to open lower at RMB 15,300/mt on Tuesday, with prices between RMB 15,250-15,250/mt. Wait-and-see sentiment should be strong in spot aluminum markets. Supply will remain ample, despite some traders’ reluctance to sell at lower prices. Coupled with sluggish downstream consumption, spot discounts are expected between RMB 40-80/mt.