LONDON: Aluminium prices fell to five-week lows on Monday as surging inventories in London Metal Exchange (LME) approved warehoues hit sentiment, while copper was supported by Chinese data showing a jump in new bank loans.
Aluminium prices (LME) on the LME were down 1% at $2,416 a tonne from an earlier $2,410, the lowest since January 10. Copper was a touch firmer at $8,859 a tonne.
“The headline rise in stocks triggered the selling in the aluminium market and some positive data from China is helping copper,” a metals trader said.
Traders said transactions ahead of settlement on Wednesday could create volatility across metals on the LME.
LME aluminium stocks at 576,775 tonnes have nearly doubled since Feb. 6, easing fears about shortages and supplies on the LME market.
Aluminium inventories in warehouses monitored by the Shanghai Futures Exchange at 268,984 tonnes are up about 180% since end-December, which analysts say is a reflection of weak demand in top consumer China.
However, a jump new bank loans in China to a record 4.9 trillion yuan ($720.21 billion) last month, suggesting the country’s central bank is looking to kickstart growth after the lifting of COVID controls, is a plus, traders said.
“It’s a positive, but it will take time to feed through,” a trader at a commodity focused fund said. “Meanwhile the macro elements are still very much in play.
Macro elements are a reference to the U.S. Federal Reserve and its decisions on interest rates, which help determine dollar direction. Clues to Fed policy will come from U.S. consumer price data on Tuesday.
A higher U.S currency typically makes dollar-denominated metals more expensive for holders of other currencies, which could subdue demand for industrial metals.
Meanwhile, rising zinc stocks in LME warehouses have eased worries about availability on the LME.
This can be seen in the narrowing premium for the cash over the three-month contract.
Three-month zinc was down 1.1% at $3,009 a tonne.
In other metals, lead was up 0.8% at $2,095 a tonne, tin added 0.1% to $27,375 and nickel slipped 3.6% to $26,790.