Aluminium prices slipped as bearish speculators kept up selling pressure, while other base metals were lacklustre ahead of the conclusion of US-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 US, 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 closed down 0.8 per cent at $US1,864.50 a tonne in final open outcry trading, rowing back some of its rebound since touching $US1,785.50 last week, the lowest in about a year.
Aluminium has the biggest speculative net short position of the LME complex at 28 per cent of open interest, a level not seen since November 2015, according to estimates by Marex Spectron detailed in a note.
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 per cent since mid October last year.
The United States and China will continue trade talks in Beijing for an unscheduled third day, a member of the US delegation said on Tuesday, as the world’s two largest economies looked to resolve their bitter 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 (US government) shutdown, which is lingering in the background.’
The dollar index rose 0.3 per cent, snapping a three-day losing streak, weighing on metals as it makes them more expensive for buyers using other currencies.
Chart patterns are indicating that downside momentum has receded in copper, Stephanie Aymes, head of technical analysis at Societe Generale, said in a note.
‘Copper is now inching towards the upper band of the short-term down sloping trend at $US5,980 to $US6,010… A break above will mean signs of a larger recovery towards $US6,079 and more importantly $US6,108 to $US6,170.’
LME copper fell 0.3 per cent to end at $US5,906 a tonne, zinc shed 0.5 per cent to finish at $US2,485, nickel gained 0.4 per cent to $US11,190, tin gained one per cent to $US19,940 and lead climbed 0.8 per cent to $US1,969.