As we signed off on Tuesday aluminium was mired in a $10-trading range on turnover of just about 1,000 lots, with the markets having slowed visibly this week for the summer recess. We left prices c. 2787 and while they dipped off to a low of 2779 before rebounding to 2804 in the pm kerb, they settled little-changed from the previous day.
In a somewhat delayed reaction to comments made last Thursday, the main story of the day appeared to concern Alcan’s hedge book. Blinkered traders with eyes only on one of the main newswires for news picked up a story yesterday that post merger, the newly-formed Rio Tinto Alcan would unwind the latter’s forward hedges (as we reported here on Friday). The article did put a figure on the company’s possible (short) exposure for the first time, estimating it at some 300,000t, or 10% of its total primary production.
The story stimulated outright buying interest, locals reported, with the latter part of the forward curve being offered as dealers positioned themselves ahead of the possible buy-back. While rates in 2008 and early 2009 tightened by up to $1.50/mth, beyond there the structure eased by $0.50-$1.00/mth to the end of 2011.
By the end of Wednesday’s premarket aluminium had replicated Tuesday’s range (2805-2781), though on dire turnover of a mere 770 lots via
LME Select. With overall technical trends flattening out, Cliff Green Consultancy had retreated to the sidelines and liquidated its shorts, the trading strategists reported. Resistance remained at 2840 with nearby support evident around 2770/80. Last at 2783.
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