A positive close Thursday and some early action in aluminium's Tom/Next market set the bullish tone for the day on Friday, with the light metal posting a strong gain. As we reported in our last Comment, Tom/Next (Dec 4th-5th) traded at $5.00 backwardation in the morning sessions, while one party had suddenly crept up into the 50-80% bracket of the LME's WC warrant banding report. Technical outright buying after the strongest close in 3 weeks coincided with a whiff of fresh CTA allocations for the start of December, making shorts even more nervous than they were already about December options declarations this week (on Wednesday). Positive remarks from Alcoa CEO, Alain Belda, about Chinese demand also aided the party as prices lifted from 2727 to a peak of 2820. The weaker dollar helped, though US ISM and construction data took their toll on copper, which failed to follow higher.
Talk of a December squeeze had all but ceased a week ago, though on Friday nearby tightness bit with a vengeance as the whole C-3m period swung from $20.50 contango to $13.50 back at the end of the day. Cash-Dec20 ended at a linear 6.00b (or 0.40b per day), Dec20-Jan03 was rated at 1.50b (2.00c) and Jan03-17 ended at 0.50b (8.00c). Jan-Feb and Feb-3m also tightened and remained linear. Forward backwardations had already been on the increase in previous days, though Friday H1 2007 leapt wider by some $5.00/mth, as did H1 2008, with rates more or less unchanged further out.
On Monday morning trading in the keenly-awaited (though not in all places, it should be said) LMEminis got underway after an early glitch in the LME's Select system. Early volumes in the 5-tonne contract were hardly influential as the market moved higher after clearing 2800 on a closing basis Friday. Locals noted Chinese producer selling, though prices remained steady at time of writing, trading to a premarket high of 2835 with a low thus far of 2810 on turnover of some 1,700 lots. Technically Cliff Green Consultancy's medium term outlook remained "rather flat", though short term indicators were up, looking for a test of resistance c. 2840/60.
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