Aluminum prices supported as China expected to extend supply reduction

LONDON — Aluminum prices inched higher on Tuesday on speculation China may sustain supply cuts after winter production curbs expire in two days.

Benchmark aluminum on the London Metal Exchange (LME) ended 0.60% higher at $2,103 per ton, after touching a Dec. 19 low of $2,087.50.

The metal, used in stainless steel, fell 1.4% in the previous session as the market prepared for the winter cuts to be lifted.

China ordered smelters in 28 northern cities to cut aluminum output by at least 30% from midNovember to mid-March as part of an anti-pollution campaign.

“If China was able to extend the supply cuts over and beyond what has already been idled in the winter… aluminum could have some upside,” said ETF Securities commodities strategist Nitesh Shah.

“But there is always the risk of slipping into the status quo because China is too scared to allow the stakeholders to be financially degraded by these moves.”

China’s top steelmaking city of Tangshan will order some steel mills to cut production by as much as half in order to improve air quality, after curbs put in place during winter expire in March, the government said on Tuesday.

The discount of LME cash aluminum to the three- month contract moved to $22 a ton, the biggest discount in nearly fivemonths. This could encourage deliveries into LME warehouses and takes pressure of prices.

President Donald Trump said this month he would impose tariffs of 10% on aluminum imports and 25% on steel imports into the United States, sparking fears of a global trade war as he risks retaliation from the likes of China, Europe and Canada.

LME aluminum is finding support near the 200-day moving average, said Natixis analyst Cameron Karami.

The most traded May aluminium contract on the Shanghai Futures Exchange (ShFE) touched its lowest since December 2016.

Inventories in Shanghai reached a fresh record high of 846,913 tons, putting pressure on prices.

India’s ambition to become a major steel exporter could be disrupted by US import curbs, Steel Minister Chaudhary Birender Singh said, underscoring the need for free trade.

On-warrant lead inventories available to the market at LMEregistered warehouses fell to 92,025 tons after 8,000 tons of cancellations, pushing prices higher.

LME lead rose by 2%to $2,390 per ton, copper finished 0.50% higher at $ 6,945, tin fell 1% to $21,160, zinc rose 1.4% to $3,286 and nickel added 1.5% to $13,875. —