LONDON: Aluminium prices rose on Tuesday as the dollar slipped and investors saw the previous session's 2.8 percent plunge as overdone given falling stockpiles and efforts by top consumer China to stimulate growth.
The United States said on Monday it would lift sanctions on aluminium Russian producer Rusal, while the London Metal Exchange (LME) said it would resume accepting all Rusal metal into its warehouses.
While the move means unsold Rusal material could hit the market, balances are tightening overall, as reflected by falling stocks. Investors are also counting on more stimulus measures from China after the Chinese New Year break in February.
Aluminium stocks in LME approved warehouses stand at 1.3 million, near their lowest since May 2018, while stocks in Shanghai Futures Exchange (ShFE) warehouses are at 690,000 tonnes, down 30 percent since last May.
"China cut three million tonnes of aluminium capacity last year (and) stocks (are) drawing. What's been a drag (is) demand weakness from China, but we (believe) China will stimuluate (growth) and that will lead to a pickup in demand," said Oliver Nugent, commodity strategist at Citi.
LME ALUMINIUM: Three-month LME aluminium traded up 0.4 percent at $1,875 a tonne in official midday rings, bringing gains for the year to around 2 percent. Aluminium ended 2018 down 18.6 percent on bets the Rusal sanctions would be lifted and on US-China trade tensions.
OPEN INTEREST: Indicating potential short covering ahead, aluminium exhibits the largest short in the base metals complex, equivalent to 22 percent of open interest, according to broker Marex Spectron.
CHINA-GROWTH: China on Tuesday unveiled measures aimed at spurring sales of items ranging from cars and appliances to information services, as the world's second-largest economy grows at its slowest pace in nearly 30 years.
ALUMINIUM DEFICIT: "We remain of the view that, with the market in heavy deficit and demand set to improve, the skew of price risk into mid-year is to the upside," BMO Capital Markets said in a note.
US-CHINA: The United States on Monday announced criminal charges against China's Huawei, escalating a fight with the world's biggest telecommunications equipment maker days before trade talks between Washington and Beijing.
CHINA-POLL: Activity in China's vast manufacturing sector likely shrank for the second straight month in January, a Reuters poll showed, heightening concerns over the risks the Chinese slowdown poses to the global economy.
OTHER METALS: Copper traded up 0.5 percent in rings at $6,030 a tonne, zinc traded down 0.1 percent at $2,677, lead was last bid up 0.4 percent at $2,086, tin traded up 0.3 percent at $20,705, while nickel traded up 1.1 percent at $11,960.
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