MI Comment: 'Hedge' covering keeps aluminium afloat

In tentative trading aluminium had picked up $20 from 2542 on Friday, edging gradually to the day's high of 2573 over lunch when the ghost of US subprime lending came to haunt the markets once more. Oil and precious metals remained strong on dollar weakness, though news of further write-downs on Wall Street hit US equities and sparked a bout of Friday afternoon liquidation. The whole base complex was in positive territory as the sell-off started, with most ending the session near unchanged. Aluminium pulled back to 2536 at one stage before recouping its losses at the close. The forward structure eased by up to $2.00/mth in 2008, tightened by up to $1.00/mth in Q1 2009 and eased by $0.50-$1.00/mth in 2011. The key Dec 2011 date ended at 77.00b from 3-months, in from 95.00b, thus rated outright at 2480 (2456). While the 20th anniversary of Black Monday fell on Friday (Oct 19th), on Monday morning the markets seemed to fear a repeat collapse, with a raft of economic readings due out this week. Oil prices were off their $90 highs, though the big losers at time of writing were precious metals and equities, while the yen was the greatest beneficiary. Among the base complex copper and others had dropped markedly, though in a continuation of last week's action aluminium continued to run into buying as speculative short 'hedge' positions were unwound. Having reopened in Asia c. 2550 prices had come off rapidly to 2522, setting the range so far, before bouncing back to 2543 and sagging again currently. Turnover via Select stood at a reasonable 2,300 lots.