SMM Aluminum Market Morning Review (2013-3-11)

SHANGHAI, Mar. 11 (SMM) – The US announced last Friday that its nonfarm payrolls increased by 236,000 and unemployment rate declined to 7.7%, both better than expected. However, improvement in labor market rekindled worries that the Federal Reserve may end QE3 early, driving the US dollar index up to near 83 and curtailing gains of commodity prices. In response, LME aluminum lost support at the 5-day moving average during the European trading session. Finally, LME aluminum closed at an intraday low of USD 1,963/mt, down 0.96%, underperforming other base metals. Latest LME aluminum inventories decreased 8,550 mt to 5,188,900 mt.

A strong US dollar and growing inflationary pressure in China will offset positive employment figures from the US. LME aluminum should be capped under the 5-day moving average and fluctuate in the band of USD 1,940-1,970/mt on Monday. SHFE 1306 aluminum contract prices are expected to open lower at RMB 14,950/mt, with prices between RMB 14,850-14,990/mt. Stagnant spot aluminum consumption will result in spot discounts of RMB 80-120/mt and overall trading should be limited.