Shanghai aluminium hits over 2-year high on strong China demand

SINGAPORE: Shanghai aluminium prices touched a more than two-year high on Thursday, fuelled by a better-than-expected recovery in top consumer China and hopes of sustained demand in the next few months.

The most-traded September aluminium contract on the Shanghai Futures Exchange ended up 1.8pc at 14,720 yuan a tonne, after hitting its highest since April 2018 of 14,805 yuan ($2,114.21) earlier in the session.

London Metal Exchange's three-month copper rose 0.3pc to $1,729.50 a tonne by 0708 GMT.

"A V-shaped recovery in China props up demand and prices for the metal more than we had anticipated," Fitch Solutions said in a report, revising its three-month LME aluminium average price forecast for 2020, to $1,690 a tonne from $1,600 earlier.

But growing US-China trade tension and a global resurgence of coronavirus cases posed risks, it added.

China's finance ministry on Wednesday set an end-October deadline for local governments to complete issuance of special bonds, often used to fund infrastructure projects that consume large amounts of industrial metals.

The US dollar dropped to a two-year trough, making greenback-priced LME metals more attractive to buyers holding other currencies, as the US Federal Reserve left interest rates near zero to support the economy.

FUNDAMENTALS

Aluminium inventories in ShFE warehouses were last at 222,498 tonnes, a 58pc-drop from the 2020 peak in March, but LME stockpiles were hovering around their highest level since April 2017.

Domestic Chinese aluminium prices rose to a two-week high of 14,780 yuan a tonne, after hitting 15,320 yuan a tonne on July 13, their highest since November 2017.

LME copper eased 0.4pc to $6,450.50 a tonne, while ShFE copper fell 0.2pc to 51,690 yuan a tonne.

ShFE zinc jumped 2pc to 18,745 yuan a tonne and nickel advanced 1.6pc to 111,340 yuan a tonne.