Aluminium falls as China jitters overpower signs of tight supply

25 Jan, 2019

Aluminium prices fell on Thursday from the previous session's four-week high as worries over the effect of a Chinese economic slowdown overpowered signs of supply tightness. On-warrant stocks of aluminium available to the market in London Metal Exchange-registered warehouses tumbled to 848,650 tonnes from more than a million tonnes a week ago.
The drawdowns helped to lift the LME's benchmark aluminium contract by 7 percent from a two-year low in early January, but it traded down 2 percent at $1,870 in official rings. Fears that the there will be a declining need for metal in top consumer China are holding back metals prices, said Societe Generale analyst Robin Bhar.
"I really don't see that changing without a breakthrough in trade talks (between China and the United States), a weaker dollar or Chinese stimulus measures," he said. However, he predicted that prices would rise to $1,950-$2,000 a tonne by the end of March if there were no escalation in the US-China trade conflict.
CHINA: The Chinese economy can maintain sustainable rates of growth despite global uncertainties, Vice President Wang Qishan said. China this week reported its weakest expansion in nearly three decades.
TRADE WAR: China and the United States will have in-depth discussions on economic and trade issues during Chinese Vice Premier Liu He's US visit next week.
DOLLAR: The US currency continued to recover towards December's 18-month high. A stronger dollar makes metals more expensive for buyers with other currencies, pressuring prices.
ZINC: Benchmark LME zinc traded down 0.4 percent at $2,610 a tonne after touching a seven-week high of $2,630. On-warrant zinc stocks in LME warehouses tumbled to 67,725 tonnes, down from 117,075 tonnes at the start of January and the lowest since 2007. Exacerbating fears of low availability of metal is LME data showing two entities between them hold most LME zinc warrants.
Cash zinc still commands a premium over the three-month contract, suggesting nearby supplies are tight. But at $9 a tonne, the premium is far from a recent high of $125. TIN: LME tin traded up 1.1 percent at $20,925 a tonne after reaching a seven-month high.
Headline LME inventories fell to a record low of 975 tonnes, down from about 3,000 tonnes in mid-December and enough to cover only one day of global demand, according to Commerzbank analysts.

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