MI Comment: Over the hedge

Even the single biggest daily gain on Wall Street for almost five years was unable to nudge aluminium through 2840 on Thursday. Equally, copper failed to crack $8000 and the pair fell back in the pm sessions, while the ‘minor’ base metals stoically held on to their earlier gains. Having made a high of 2841 before we went to press, the lack of momentum and heavy layer of overhead selling inspired speculators to sell it short, driving the market to a low of 2795 in the pm sessions. Despite a weekend’s worth of contango passing out of the C-3m period nearby rates still lengthened as Sep-3m stretched wider by US¢9 per day. Monthly index rolls were said to be keeping contangos close to full finance, locals suggested. Meanwhile, despite outright values tailing off, forward rates tightened markedly to the end of 2010. Dec’08-Mar’09 gained most, jumping from 26.00b to 39.00b, with backwardations elsewhere accruing $0.50-$1.50/mth. There was again no change in the LME’s WC report, with two parties each with cumulative Warrants, Tom and Cash positions equal to 30-40% of all non-cancelled stock. So far on Friday morning trading had been uninspiring, while locals lamented the prospect of Alcan withdrawing from LME hedging after completing its agreed takeover by Rio Tinto. The size of its current (short) position was undeclared, though the forthcoming buyback was clearly not troubling anyone. At time of writing prices had kept to a narrow 2810-2793 range on total Select turnover of only 1,200 lots, supported by the 10- and 100-day moving averages c. 2790. With its buy-stops remaining intact above 2840, Cliff Green Consultancy held on to shorts established earlier this week, still looking for eventual moves towards 2660.