Aluminium was 'in play' as we signed off Thursday, romping from 2800 to 2868 when we went to press, making a high of 2875 in the afternoon. A combination of factors was at work with nearby tightness and the persistent dominant (LME) long underscored by another day of sizeable draws on stocks. Locals also pointed to a report that rising power costs in Brazil may hamper BHPB's expansion plans in the country, while spare physical tonnage in Europe remained as scarce as a Nintendo Wii games console before Christmas. However, in the background it looked like the aluminium market's big beasts were at it again, building up option longs, this time for the March ('07) date; all while traders were still fretting about December 20th. It was a day for shorts to stop out and for 'systematic' CTAs to turn around basis a close above 2860, which had been a key technical level for some weeks.
Predictably nearby spreads tightened throughout with Dec20-21 rated at 3.00b (Level), though Dec21-Jan17 ended at a relatively generous 5.00c (6.00c). The biggest mover was Jan22-Feb21, rated at 12.00b from 6.85b. Given the amount of anticipated forward selling at recent highs, movement beyond 3-months was modest, with 2007 gaining $2.00-$3.00/mth and with 2008 onwards steadier by only $0.50/mth.
Activity on Friday morning was surprisingly quiet, given the technically strong close, though stock movements reported in London and Shanghai were minimal and the dollar was putting on a spurt following better-than-expected weekly US unemployment data. LME Select had reopened lower at 2852 and pre-stocks traded to a high of 2863 before slipping off to 2840 currently. Volumes so far were no more than average at 1,600 lots, though chart-watchers were looking for more upside, saying that yesterday's flurry was "just the start" and that more buying was on the way. Good support would now be found c. 2800, Cliff Green Consultancy wrote, with resistance up to 2900 to be challenged next, they added.
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