Alu­minium drops as bears at­tack, oth­ers wait for news on China

The Financial Daily - - NATIONAL -

LON­DON: Alu­minium prices slipped on Tues­day as bear­ish spec­u­la­tors kept up sell­ing pres­sure while other base me­tals were lack­lus­tre ahead of the con­clu­sion of U.S.-China trade talks.

Alu­minium has been the worst per­former on the Lon­don Metal Ex­change dur­ing the last two months on con­cerns about ex­cess sup­ply that gath­ered mo­men­tum after the United States said it would lift sanc­tions on Rus­sian gi­ant Rusal.

"I've been pretty gloomy on the alu­minium mar­ket for some time and I ex­pect more down­side in com­ing months," said Ross Strachan, se­nior com­modi­ties econ­o­mist at Cap­i­tal Eco­nom­ics in Lon­don.

"There are smelter re-starts in the U.S., a very large ex­pan­sion in Bahrain, and in China you've got sig­nif­i­cantly more pro­duc­tion than at this time a year ago," he said.

"This is all com­ing at a time when de­mand is prov­ing to be rel­a­tively soft and slow­ing in a num­ber of the ma­jor mar­kets."

Alu­minium was the big­gest mover on the LME on Tues­day, fall­ing 1.1 per­cent to $1,858 a tonne in of­fi­cial open out­cry trad­ing, row­ing back some of its re­bound since touch­ing $1,785.50 last week, the low­est in about a year.

* ALU­MINIUM SPEC­U­LA­TORS: Alu­minium has the big­gest spec­u­la­tive net short po­si­tion of the LME com­plex at 28 per­cent of open in­ter­est, a level not seen since Novem­ber 2015, ac­cord­ing to es­ti­mates by Marex Spec­tron, the bro­ker said in a note.

* ALU­MINIUM STOCKS: Ex­cess sup­ply was ev­i­dent in a build up of LME alu­minium in­ven­to­ries, which rose again on Tues­day, daily LME data showed. The stocks have surged nearly 40 per­cent since mid Oc­to­ber last year.

* U.S.-CHINA: U.S. Com­merce Sec­re­tary Wil­bur Ross pre­dicted Bei­jing and Wash­ing­ton could reach a trade deal that "we can live with" as dozens of of­fi­cials from the world's two largest economies re­sumed talks to end their trade dis­pute.

The uncer­tainty was lead­ing to muted ac­tiv­ity, Strachan said. "I think peo­ple are hold­ing back be­fore we've got any news on the trade talks or the (U.S. gov­ern­ment) shut­down, which is lin­ger­ing in the back­ground."

* DOL­LAR: The dol­lar in­dex rose 0.2 per­cent, snap­ping a three-day los­ing streak, weigh­ing on me­tals as it makes them more ex­pen­sive for buy­ers us­ing other cur­ren­cies.

* PRE­MI­UMS: China cop­per pre­mi­ums were at $70.50 a tonne, up $8 from an 18-month low of $62.50 in early De­cem­ber, in­di­cat­ing stronger im­me­di­ate de­mand for phys­i­cal cop­per.

* PRICES: LME cop­per dipped 0.1 per­cent to $5,920 a tonne in of­fi­cial rings, zinc shed 0.5 per­cent to trade at $2,486, nickel fell 0.2 per­cent to $11,130, tin was un­changed at $19,750 and lead, un­traded in rings, was bid down 0.2 per­cent at $1,950.

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