LONDON: Aluminium prices fell on Tuesday after inventories in London Metal Exchange-registered warehouses jumped, though losses were limited by expectations of robust demand and tight supplies in top producer China.
Benchmark aluminium on the London Metal Exchange was down 0.6% at $2,638 a tonne, reversing earlier gains which took prices to $2,665.25, the highest since Dec 2.
"Aluminium has come off a lot compared with other base metals, it looks cheap given healthy demand globally," said Dan Smith, managing director at Commodity Market Analytics.
Smith said Chinese supplies may rise if the government puts growth before the environment, but not by enough to significantly alleviate shortages.
Prices of aluminium, used in the transport, packaging and construction industrie have dropped 18% since hitting 13-year highs of $3,229 a tonne in October.
Inventories: Aluminium stocks rose 67,750 tonnes to 977,400 tonnes, while cancelled warrants -- metal earmarked for delivery -- have fallen to 15% of the total from 35% at the end of November.
Receding worry about aluminium supply on the LME market has also narrowed the premium for the cash over the three-month contract to around $8 a tonne from Monday's close at $16.20 a tonne.
Output: China's aluminium production has fallen this year due to power shortages and curbs on heavily polluting industries.
"Higher energy prices and emission related production curbs in China should be supportive," said ANZ analyst Soni Kumari. "On the demand side, prospects of an improving auto sector could a bright spot for aluminium."
Copper: Stocks of copper in LME warehouses rose for the fourth consecutive day taking the total to 87,275 tonnes from 74,225 tonnes Dec. 6.
Concerns about supply have eased as on-warrant stocks -- metal available to the market -- have risen to 82,850 tonnes from close to 15,000 tonnes in the middle of October.
The premium for the cash over the three-month contract has reversed into a discount.
Three-month copper was little changed at $9,445 a tonne.
Other Metals: Zinc eased a touch to $3,323, lead ceded 0.3% $2,292, tin rose 0.9% to $39,095 and nickel slipped 0.3% to $19,645.