SMM Aluminum Market Morning Review (2013-4-16)

SHANGHAI, Apr. 16 (SMM) – China’s slowing Q1 GDP growth dampened market sentiment. This is compounded by a sharp decline of April New York Fed manufacturing index to 3.05 and a third straight monthly drop of April NABH Housing Market Index to 42. Shorts dominated the market due to worries over demand, sending LME aluminum down to USD 1,818/mt during early European session, the lowest since October 2009. However, LME aluminum managed to reverse losses due to limited upside space of the US dollar index and short-covering. Finally, LME aluminum closed 1.12% higher at USD 1,876/mt. Latest LME aluminum inventories decreased 2,425 mt to 5,192,325 mt.

Cost support will help aluminum prices resist declines, despite oversupply pressure. LME aluminum should struggle at USD 1,850/mt, with prices between USD 1,825-1,875/mt on Tuesday. SHFE 1306 aluminum contract is expected to open at RMB 14,550/mt and move within RMB 14,460-14,560/mt. In spot market, spot discounts are expected to expand to RMB 60-100/mt as SHFE 1305 aluminum contracts have become the new current-month contract. Overall trading should be light on abundant supply against slack demand.