MI Comment: Aluminium steadies as lending abates

In a busy premarket session that saw more than 6,000 lots clicked on LME Select, aluminium more or less set the range for the rest of Monday. Lead was the day’s biggest mover as it fell victim to the “what goes up, must come down” principle, while the rest of the metals complex had a comparatively sideways day. On the heels of Friday’s poor US macro data had come stronger-than-expected manufacturing orders in Germany and a fourth consecutive monthly rise in UK manufacturing. Copper specifically found support from ongoing labour strife in Latin America, while the whole commodities sector benefited from strong oil and safe-haven buying in precious metals, with US equities also steadier. The light metal had resumed trading at 2678 and slid to 2636 before we signed off yesterday and although it bottomed later at 2630 in the pm sessions, at the closing bell 3-month values were just up on the day after a late bounce. Nearby contangos ended little-changed, though there was finally a moratorium in the heavy lending that had shrunk the forward structure in recent days. Rates beyond 3-months stabilised, with 2010 firming by $2.00/mth while the rest recouped $0.50-$1.00/mth. As at close of business Friday one party reappeared in the 30-40% bracket of the LME’s EC warrant banding report. On Tuesday morning trading was more routine, edging marginally higher on modest turnover of 1,700 lots currently. Dealing had resumed at 2660 and prices had perked up to a high of 2678 before slipping again to 2655. After large scale short positions had been put on since the end of last week, stops could be expected to be found above 2720, locals suggested. However, short term trends are down, wrote Cliff Green Consultancy, looking for tests of support c. 2615 initially, then 2540/50. Resistance was pegged at 2710/20 in the first instance, with the trading strategists now looking to “probe the short side on corrective bounces”, they concluded. Last at 2658.