SMM Aluminum Market Morning Review (2013-6-6)

SHANGHAI, Jun. 6 (SMM) – According to the ADP National Employment Report, 135,000 jobs were added in US private sectors in May, well below the 165,000 forecast. This kept investors cautious about non-farm employment due to the released tomorrow. US factory orders increased 1.0% MoM in April, also missing expectations. On the other hand, disappointing data will allow the US Federal Reserve to keep monetary stimulus in place, sending the US dollar index down. However, gains of commodity prices were limited by cloudy economic prospects. Aluminum Corporation of China (Chalco) announced yesterday that it will implement flexible production at some of its aluminum smelters to maximize profits, cutting capacity by 380,000 mt/yr. This will help ease overcapacity and lend support to aluminum prices. As a result, LME aluminum leaped to USD 1,981/mt, leading gains among base metals. LME aluminum, however, trimmed some gains at the tail of the session due to market caution, and finally closed up 1.09% at USD 1,964.3/mt, sustaining a 7-day winning streak. LME aluminum inventories increased 8,150 mt to 5,204,550 mt, while positions were also up 5,738 lots to 763,132 lots.

Production cuts by Chalco will bolster the light metal in the short term. LME aluminum should hold stable at USD 1,950/mt and move within USD 1,950-1,990/mt on Thursday. SHFE 1309 aluminum contract is expected to open higher at RMB 15,000/mt, with prices between RMB 14,900-15,100/mt. In spot market, downstream restocking ahead of the three-day holiday against short supply will buoy spot aluminum prices, with spot discount expected between RMB 0-20/mt and premium between RMB 0-20/mt over SHFE 1306 aluminum contract prices.