SMM reported that China's manufacturing PMI rose to a 7 month high in November. Risk appetite grew during the European session pushing commodity prices up.
The US November manufacturing PMI declined more than expected, increasing expectations for additional monetary policy easing, sending the US dollar index below 80. As a result, LME aluminum staged a strong rally overnight by jumping to a high of USD 2,125 per tonne Positions surged by more than 10,000 lots.
LME aluminum pared some gains at the tail of trading before finally ending the day up USD 26 per tonne or 1.25% at USD 2,114 per tonne. Latest LME aluminum inventories decreased 7,700 tonnes to 5,199,525 tonne.
The US dollar index should be capped below 80, and this will help aluminum prices stabilize. LME aluminum should struggle at USD 2,100 per tonne and move between USD 2,080 per tonne to USD 2,130 per tonne. The SHFE 1301 aluminum contract is expected to open higher at CNY 15,400 per with prices at CNY 15,360 per tonne to 15,440 per tonne.
Buyers and sellers should stand on the sidelines at the beginning of the month. Supply will remain ample due to tight cash flows at year's end. Downstream buying interest should be limited and only middlemen will actively seek low priced deliverable branded goods. Spot discounts are expected between CNY 70 per tonne to CNY 110 per tonne and overall trading will be light.
