LONDON: Aluminium prices headed towards two-month lows on Friday as sliding coal prices eased concerns over supplies in top producer China, where coal-fired power is a key component in the metal’s production process.
Benchmark aluminium on the London Metal Exchange (LME) traded down 1.9% at $2,693 a tonne in official rings, having touched its lowest since late August at $2,602 on Thursday.
Also weighing on aluminium was a shortage of magnesium, which is used to make aluminium alloys for the auto and construction industries, said Duncan Hobbs, research manager at Concord Resources.
“The magnesium shortage may undermine downstream demand for aluminium,” he said. “However, aluminium prices will have to trade at higher levels on average in years to come to incentivise production outside China.”
COAL: China’s coal futures prices registered their biggest fall in more than five years after the country’s state planner said there was room to adjust prices after recent investigations into producers.
“Initial results showed coal production costs are significantly lower than current spot coal prices,” China’s National Development and Reform Commission said
TECHNICALS: Aluminium prices are testing support at the 100-day moving average, currently around $2,690. A break below that could trigger a sell-off, sending it towards the 200-day moving average around $2,470.
COPPER: Having hit $10,452.50 a tonne in early October, the highest level since May 18, copper has fallen 8% but remains on course for its best month since April.
Gains have been fuelled by falling stocks in LME-registered warehouses, which are down 45% since August at 140,175 tonnes.
Cancelled warrants — metal earmarked for delivery — at 108,700 tonnes suggest further draws over the coming days. Worries about supplies on the LME market have created a premium for cash copper over the three-month contract.
Three-month copper was down 0.5% at $9,615 a tonne. OTHER METALS: Zinc was down 1.1% at $3,335 a tonne, lead ceded 0.9% to $2,401 and nickel slipped 1.4% to $19,300.
Tin gained 3.1% to $36,950 as market focus returned to shortages of the soldering metal with LME stocks at 680 tonnes, the lowest since 1989.
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