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