Aluminium prices tumbled to six-year lows on Thursday as the market focused on a growing supply glut due to surging exports from top producer China and high stocks. Benchmark aluminium on the London Metal Exchange slid to $1,576 a tonne, the lowest since July 2009. The metal used in transport and packaging recouped some of the losses to close at $1,592.50, down 0.2 percent.
China's exports of primary aluminium rose to 20,412 tonnes in the first six months of the year, a surge of 66 percent from the same period a year ago. But the more pressing worry is exports of semi-finished aluminium products, which at 2.22 million tonnes have jumped 44 percent.
"Aluminium is an oversupplied market, China is releasing its surplus," said Vivienne Lloyd, analyst at Macquarie. "It needs to fall towards $1,500 to convince people smelter closures are necessary." Stocks of aluminium in LME approved warehouses stand at around 3.4 million tonnes, but that does not include stocks held off exchange and by producers. Norsk Hydro, one of the world's biggest aluminium producers, in a Reuters interview last month estimated global inventories at about 14 million tonnes.
"Aluminium saw 57,000 lots (1,425,000 tonnes) of shorts added last week, increasing the speculative short to 134,500 lots or 21 percent of open interest," Marex Spectron said in a note. "This is the biggest speculative short since mid-January." Three-month copper added 0.1 percent to end at $5,185 a tonne. The metal used in power and construction has come under pressure from weak demand growth in top consumer China, where the economy is slowing, dropping a fifth since early May.
"It does look as if downside momentum has slowed since Monday," a trader said. "There are some aggressive shorts out there, if they decide to square you could see a strong rally." Copper slid to a six-year low of $5,142 on Monday. One factor starting to provide support for copper is the prospect of tighter supplies due to output disruptions.
"Year-to-date, we estimate that over 500,000 tonnes of contained metal output has been lost to the market," Morgan Stanley said in a note. Among other metals, lead closed down 1.2 percent at $1,705 a tonne. "We see the market ex-China in a small current surplus. This is something of a change from 12-18 months ago when we thought there would be a small deficit this year," Huw Roberts of CHR Metals consultancy told the Reuters Global Base Metals Forum. "What has changed is that we are finding more secondary production." Zinc ended down 1.4 percent at $1,867 a tonne, nickel dipped 0.1 percent to finish at $10,850 and tin closed unchanged at $15,500.
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