Aluminium hits 5-week high on fund buying, alumina shortage

LONDON: Aluminium prices hit a five-week high on Tuesday as a shortage of alumina, the raw material for making the metal, in top producer China triggered fund buying.

Focus is also on a looming rail strike in Canada, the largest supplier of aluminium to the United States, traders said. However, physical market aluminium premiums paid above the LME benchmark by US buyers are yet to react.

In 2023, Canada shipped 2.65 million tonnes of unwrought aluminium to the United States. This amounts to 63.7% of US aluminium imports, according to data provider Trade Data Monitor. Three-month aluminium on the London Metal Exchange last traded up 1.6% at $2,483 per metric ton as at 1344 GMT, the highest since July 15. Momentum was fuelled by a break of the 50-day moving average on Monday.

“Aluminium was too cheap one month ago ... the rally is restoring its fair value,” Daniel Smith with Amalgamated Metal Trading Ltd said. Negative sentiment for aluminium is fading with some funds known as commodity trading advisors (CTAs) starting to build a net-long position in the light metal, Smith added.

Also supporting aluminium are China’s surprising rise in imports despite robust domestic production, Smith said. China bought 129,898 tonnes of primary aluminium in July, up 11.5% year on year, customs data showed on Tuesday.

China’s alumina futures hit a near three-month high due to rising consumption. Cuts in alumina refineries of Alcoa and Rio Tinto in Australia also strained supply.

Over 30% of alumina inventories were withdrawn from warehouses monitored by Shanghai Futures Exchange (ShFE) in the past three weeks, as profit related to making primary aluminium improved. LME copper was flat at $9,249 a ton, with upside capped by high inventory. Warehouse stockpiles rose to a five-year high of 320,050 tons, with LME data on Aug. 19 showing a major increase in stock in Taiwan. The pace of Chinese copper exports slowed in July, customs data showed on Tuesday.

The top copper consumer sold 70,006 tons of copper overseas last month, half of what it exported in June. Among other metals, LME nickel rose 1.6% to $16,930, zinc edged up 1.3% to $2,822.5, tin was up 0.3% at $32,670 and lead advanced 1.5% to $2,068.5.