Aluminium touches near two-month peak, but seen vulnerable

• One of the things that aluminium is going to run into up here is... producer hedging starting to appear again in the market.
• On a margin basis, given the fall we've seen in price of alumina over the course of this year, it's not a bad level for some people to start hedging.
• Benchmark aluminium on the London Metal Exchange was up 0.4% to $1,820.50 a tonne by 1145 GMT, the highest since Sept. 12.

LONDON: Aluminium prices climbed to the highest in nearly two months on Friday, but they were likely to run out of steam with producers on the sidelines ready to hedge, analysts said.

The price of aluminium, mainly used in transport, construction and packaging, has rallied 6% over the past two week, largely fuelled by bearish investors buying back their short positions.

But the global market is expected to flip into a surplus next year, according to analysts polled by Reuters.

"I think whether it's got legs from here is pretty questionable. You don't have anything to suggest that the fundamentals are improving," said Marcus Garvey, commodities strategist at Macquarie in London.

"One of the things that aluminium is going to run into up here is... producer hedging starting to appear again in the market. On a margin basis, given the fall we've seen in price of alumina over the course of this year, it's not a bad level for some people to start hedging."

A climb in the dollar index to the highest in over three weeks would also encourage forward selling by producers, Garvey added.

Aluminium prices were capped on Thursday by "evidence of a producer offer", Dee Perera at broker Marex Spectron said in a note.

Benchmark aluminium on the London Metal Exchange was up 0.4% to $1,820.50 a tonne by 1145 GMT, the highest since Sept. 12.

TRADE DEAL:

Markets were cautious after officials from Beijing and Washington said they had agreed to roll back tariffs on each others' goods if a "phase one" trade deal was completed, but a White House trade adviser cautioned no agreement had yet been sealed.

COPPER:

LME copper slipped 0.1% to $5,970.50 a tonne after hitting its highest in more than three months on Thursday.

"To properly break higher...you probably need to see confirmation that some of the stuff announced yesterday is actually going to be delivered upon," Garvey said.

CHINA IMPORTS:

China's copper imports fell 3.1% in October from the previous month, customs data showed, as a cooling manufacturing sector in the country kept demand subdued.

"The market is not good," said CRU analyst He Tianyu in Shanghai, adding that demand for copper from China this year had been increasing but at a slower rate than in 2018, due to weak consumption in the automotive and air conditioning sectors.

SHANGHAI STOCKS:

Nickel stocks in warehouses certified by the Shanghai Futures Exchange climbed 12% from a week earlier to 30,831 tonnes, their highest since the week ended June 1, 2018, while lead stocks jumped 34.7% in the same period to a 10-week high.

PRICES:

LME lead fell 0.9% to $2,094.50 a tonne after hitting $2,084, the lowest since Oct. 2, nickel rose 0.2% to $16,225, zinc added 0.1% to $2,487.50 and tin gained 0.8% to $16,685.