LONDON: Aluminium hit 16 month lows on Monday as investor worries over slowing global growth and tightening monetary conditions overshadowed news of smelter cuts in China, while copper extended four straight weeks of losses.
Chinese aluminium producers are set to cut at least another 800,000 tonnes per year of smelting capacity in the coming months, while Beijing plans to ratchet up support for the economy in 2019 by cutting taxes and keeping liquidity ample.
Investors are however fretting that the global economy is slowing just as monetary conditions the world over are tightening, with political instability in the United States leaving open the possibility of a prolonged government shutdown.
There are also signs the U.S. trade dispute with China is hurting growth in the world’s top metals consumer.
“At the moment there’s too many headwinds on the demand side for people to be concerned about supply,” said Colin Hamilton, head of commodities research at BMO Capital Markets.
However, he added that the aluminium market globally had a reasonably substantial deficit, while it also appeared that Beijing was looking for more consolidation in China’s aluminium sector.
* ALUMINIUM: Aluminium was down 0.6 percent at $1,898.50 a tonne by 1124 GMT, having hit its lowest since mid July at $1,896.50. The metal hit 16-month lows last week after the U.S. lifted sanctions Russia’s Rusal, the world’s second largest aluminium producer.
* CHINA CUTS: China has cut more than 3 million tonnes of aluminium smelting capacity so far this year, but this has been offset by the resumption of some production and new production lines.
“Capacity reduction will help to support aluminium prices… But the scale of price rebound will depend on the actual implementation of the cuts,” said analysts from CITIC Futures in a note.
Overall, metals trade is becoming tepid ahead of the year-end, they added.
* GLOBAL MARKETS: World stocks were set for their seventh straight session of losses, with the S&P 500 on track for its worst December since the Great Depression.
* STEEL: Chinese steel prices fell 1.5 percent, curbed by weak market sentiment despite a pledge by Beijing to step up support for the economy.
* LEAD TECHNICALS: Lead was up 0.9 percent at $1,983 a tonne, with signs of nearby market tightness emerging as cash lead traded at a premium of $2 a tonne to the benchmark 3 month price, its highest since mid-October.