MARKET TALK: LME Aluminum May Test $2,550 On Fund Selling

LME 3-month aluminum may test lower end of 6-month trading range at $2,550-$2,875/ton if dominant hedge fund continues to reduce its long cash position, says Harbor INTELLIGENCE. Notes hedge fund last week reduced its cash position from 89%-90% of market open interest to 40%-50%, pushing cash to 3-month spread into contango, no sense of tightness short term. Adds underlying fundamentals increasingly bearish on growing Chinese production, greater chance of large surplus in 2007. However notes if hedge fund doesn't eliminate or continue to reduce position, 3-month likely to see volatile range-trading short term. LME 3-month aluminum last at $2,766/ton, +$4 on London PM kerb.