SMM Morning Review - 2010/8/3 Aluminum Market

SHANGHAI, Aug. 3 (SMM) -- LME base metals prices extended gains yesterday. LME aluminum prices opened at USD 2,170/mt, with the highest level and the lowest level at USD 2,230/mt and USD 2,160/mt, respectively, and finally ended at USD 2,217/mt, up USD 47/mt compared with the previous trading day, or up 2.2%. Total trading volumes reached 162,378 lots, and total positions were 715,147 lots, up 5,012 lots. LME aluminum inventories declined by 4,200 mt to 4,381,100 mt.

The US government released on Monday that the manufacturing index in July was better than expected despite of a month-on-month drop. The euro-zone PMI rose, and HSBC and BNP Paribas unveiled positive earnings reports. The favorable economic data again boosted market confidence, which in turn helped support the upward trends of the European and the US stock markets. In addition, Federal Reserve Chairman Ben Bernanke said he is confident in the solid growth in the US economy, and the US dollar index slipped to below 81, and the euro strengthened to 1.3195 against the US dollar in response, setting a new high since May 4th, 2010. Meanwhile, crude oil prices in the US also broke through USD 81/bbl, up over 3%. LME base metals prices closed with gains last night stimulated by strong stock markets, weakening US dollar, and positive economic data. LME aluminum hit a 13-week high, and technical indicators show strong upward momentum in aluminum prices, with LME aluminum prices expected to hit the USD 2,300/mt mark in the near term.  

SHFE aluminum prices fell back after opening high in the morning session today, and SHFE 1011 aluminum contract has became the most active contract in advance. SHFE 1011 aluminum contract prices will likely undergo downward corrections after rising consecutively, but steady declines in aluminum inventories and strengthening LME aluminum prices will help support the upward trends of aluminum prices, and SMM predicts SHFE 1011 aluminum contract prices will fluctuate between RMB 15,700-16,000/mt today.   

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