Industrial metals prices rose on Tuesday as some countries eased coronavirus lockdown measures and oil prices jumped more than 10%, but aluminium lagged, with investors worried that a collapse in demand will cause huge oversupply.
Benchmark aluminium on the London Metal Exchange (LME) was up 0.3% at $1,488 a tonne at 1410 GMT, snapping three days of losses but still close to a four-year low of $1,455 touched on April 8.
The metal used in packaging and transportation has tumbled around 20% since mid-January as the coronavirus pandemic shuttered global industry.
But global output has risen, and analysts at ING said they expected a surplus of 1.5 million tonnes this year in the roughly 60-million tonne a year market.
"This month will be critical for aluminium as we wait and see if China's market can continue its recovery, and whether demand growth from the rest of the world finds a bottom," ING said.
"Prices, particularly in China's market, have yet to fully appreciate the damage in trade, suggesting the risk of another leg down."
China is the biggest aluminium producer and consumer, and began to emerge from coronavirus lockdown earlier than other countries.
Speculators expect prices to fall. Their net short position in LME aluminium was equal to 48% of open contracts on Friday, brokers Marex Spectron said.
The discount of cash aluminium versus three-month metal on the LME reached $40.15, the most since 2015, suggesting plentiful nearby supply.
Inventories in LME warehouses have risen to 1.36 million tonnes from under a million tonnes in mid-March, while stocks in Shanghai Futures Exchange stores are down around 120,000 tonnes from mid-March to 410,543 tonnes.
New York Governor Andrew Cuomo outlined a phased reopening of business activity. California may allow some retail business to resume this week. Italy, Spain, Portugal, Belgium and India are also cautiously lifting some restrictions.
The easing of lockdowns helped global equities snap a three-day losing streak and oil prices rise as much as 13%.
The US dollar strengthened, with the euro falling after a German constitutional court ruled that the Bundesbank must stop buying government bonds if the European Central Bank cannot prove those purchases are needed.
Britain's economy is on course for an unprecedented 7% quarterly contraction and its new car sales slumped by 97% in April.
US business activity plumbed new record lows in April, a survey confirmed on Tuesday.
The Trump administration is "turbocharging" an initiative to remove global industrial supply chains from China as it weighs new tariffs on Beijing, officials said.
LME copper was up 1% at $5,174 a tonne, zinc rose 1.1% to $1,921, nickel gained 1.7% to $12,010, lead added 0.5% to $1,638 and tin was 1% higher at $15,230.
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