MI Comment: Aluminium bounces as China growth accelerates

With the exception of tin and lead the LME complex drifted lower in quiet summer-like trading on Wednesday. By the time we signed off yesterday aluminium had come off from 2805 to 2781 on a measly 770 lots and it later extended the slide to 2761; below support pegged by Cliff Green Consultancy at 2770. However, comments by US Fed Chairman Ben Bernanke seemed to soothe fears over both inflation and the sub-prime mortgage market, while copper was boosted by talk of possible strike action at Southern Copper. As such, the slide reversed and the light metal bounced off the 200-day moving average to 2790 in late trading. Much had been made on Tuesday of traders jockeying for position ahead of potentially heavy liquidation of Alcan’s forward positions, though as at cob Wednesday backwardations beyond 3-months were $0.50/mth steadier mostly. Nearby spreads were all linear, though narrower to August and easier from September onwards, while the LME’s WC warrant banding report was now clear of any holdings. Activity was rather better on Thursday morning, with reports of continued strong growth in the Chinese economy egging the metals complex on. At the same time the authorities there were doing their level best to strangle growth in aluminium exports too, helping to underpin values here. At time of writing trading had resumed in the early hours at 2788 and over the premarket prices had climbed to 2812, with LME Select clocking up a respectable 2,500 lots. Stiff resistance was again expected by CGC c. 2830/40, while support had now been marked $10 lower at 2760/70.