Aluminium hits two-month low as inventories, output climbs

LONDON: Aluminium prices slipped to their lowest in two months on Tuesday as inventories and production climbed, raising fears of larger surpluses.

Three-month aluminium on the London Metal Exchange was down 0.8% at $1,956 a tonne by 1150 GMT after touching $1,945, the weakest since Nov. 16.

"In the short term, you have those inventory rises from both markets, China and ex-China, which is capping the upside of aluminium," said Wenyu Yao, senior commodities strategist at ING Bank.

LME inventories have jumped by 10% over the last two days to 1.41 million tonnes, while stocks in warehouses registered with the Shanghai Futures Exchange have gained 12% over the last month.

The stock gains in China were expected ahead of the Lunar New Year holiday, which kicks off in mid-February, Yao added.

China's aluminium production in 2020 rose 4.9% from the prior year to a record 37.08 million tonnes as smelters cashed in on soaring prices, with December output hitting a monthly all-time high.

Traders have been expecting LME aluminium prices to stall after they surged 44% from April last year to the highest in over two years in December.

• LME copper prices added 0.4% to $8,001 a tonne as global investors awaited an upcoming speech by US Treasury Secretary nominee Janet Yellen that could determine the tone of policy in the world's largest economy.

The speech by Yellen, President-elect Joe Biden's nominee to run the Treasury Department, will likely give an indication about the direction of the dollar, a factor affecting greenback-priced metals on the LME, and over a further stimulus programme from Washington.

• News that China reported the worst outbreak of COVID-19 since March 2020, while virus infections in other major economies remained high dampened sentiment.

• LME nickel edged up 0.1% to $18,080 a tonne, zinc lost 0.3% to $2,674, lead rose 0.3% to $2,003 and tin was barely changed at $21,240.