MI Comment: Aluminium cools over weekend

A Chinese interest rate rise and an IAI update showing a global rise in monthly aluminium production failed to prevent the market from breaking ‘pivotal’ resistance at 2840 on Friday morning. The whole commodities complex benefited from unchecked Chinese economic growth and endemic dollar weakness, as copper, lead et al all made higher ground, without fresh metals-specific news in the market. The light metal shot from early indications c. 2828 to a peak of 2865 before we signed off, later extending to 2870 in the pm sessions, though the week ended on a downward tack, bottoming at 2850 in the aftermarket. Nearby contangos were all but a carbon copy of the previous day’s. More surprisingly, forward rates betrayed only minimal signs of producer selling interest, with rates largely static or $0.50/mth steadier here and there. The latest WC warrant banding report remained empty. Trading resumed at 2855 on Monday morning, though it appeared that the weekend had cooled traders’ enthusiasm so far with prices pulling back sharply to a low of 2824 currently. Copper had fallen back on confirmation of a slowing in Chinese imports last month, while predictions of an aluminium surplus to the tune of 290,000t for 2007 by one trader summed up this market’s fundamentals. Technically aluminium remained confined to the broad range of the past 12 months, wrote Cliff Green Consultancy in their latest daily report, with a test of resistance c. 2900 expected next. A failure to breach that, followed by the next layer c. 2950, was likely to lead to renewed bouts of weakness, the trading strategists concluded. Last at 2830, on a mediocre 1,400 lots.