LONDON: Aluminium prices fell on Tuesday after inventories in London Metal Exchange-registered warehouses jumped, though losses were limited by robust demand and tight supplies expected in top producer China. Benchmark aluminium on the London Metal Exchange (LME) was down 1.1% at $2,626 a tonne at 1704 GMT, reversing gains that had taken prices to their highest since Dec. 2 at $2,665.25.
“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 that Chinese supplies could rise if the government puts growth before the environment, but not by enough to alleviate shortages significantly.
Prices of aluminium, used in the transport, packaging and construction industries, have dropped 18% since hitting a 13-year high of $3,229 a tonne in October.
INVENTORIES: Aluminium stocks rose by 67,750 tonnes to 977,400 tonnes, while cancelled warrants — metal earmarked for delivery — have fallen to 15% of the total, down from 35% at the end of November.
Receding worries about aluminium supply on the LME market has also narrowed the premium for cash metal over the three-month contract to $2.50 a tonne from Monday’s close at $16.20 a tonne.
OUTPUT: China’s aluminium production has fallen this year because of 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 be a bright spot for aluminium.”
COPPER: Stocks of copper in LME-registered warehouses rose for the fourth consecutive day, taking the total to 87,275 tonnes from 74,225 tonnes on 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 cash metal over the three-month contract has reversed into a discount.
Three-month copper fell 0.6% to $9,390 a tonne.
OTHER METALS: Zinc slid by 1% to $3,290, lead was down 0.6% at $2,285, tin was little changed at $38,750 and nickel retreated 1.1% to $19,505.