LONDON: Aluminium climbed to a two-week high on Thursday as firm demand in top consumer China and lower inventories in London Metal Exchange (LME) approved warehouses created momentum for prices to break through a key technical level.
Overall, the firmer US currency making dollar-priced metals more expensive for holders of other currencies weighed on prices and aluminium retreated after the New York open.
Benchmark aluminium had fallen 0.9% to $2,198.5 a metric ton by 1623 GMT. Prices of the metal used in the transport, construction and packaging industries earlier touched $2,228, the highest since Oct. 12.
“Chinese aluminium demand has been more solid than expected this year, with high production but not a quick build-up of inventory,” said Alastair Munro at broker Marex. Traders say the industrial metals market is looking ahead to surveys of purchasing managers in China’s manufacturing sector due towards the end of October for clues to demand. China consumes around half of global metal supplies. Aluminium broke above the $2,210 level where the 50- and 100-day moving averages currently sit and is testing resistance at $2,225, the 21-day moving average.
Stocks of aluminium in LME warehouses at 480,250 tons have dropped nearly 20% since early June. Canceled warrants or metal earmarked for delivery at 57% of total stocks suggests more aluminium is due to leave the LME system.
Large holdings of aluminium warrants - a title document conferring ownership - and cash warrants are also behind higher prices, traders said.
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