Aluminium prices have fallen from the previous session’s four-week high as worries over the effect of a Chinese economic slowdown outweighed signs of tight supply.
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 seven per cent from a two-year low in early January, but it closed down one per cent on Thursday at $US1,890.50 a tonne.
Fears that demand for metal in top consumer China will fall 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 $US1,950-$US2,000 a tonne by the end of March if there were no escalation in the US-China trade conflict.
The United States and China are ‘miles and miles’ from resolving trade issues but there is a fair chance the two countries will get a deal, US Commerce Secretary Wilbur Ross said ahead of talks in Washington next week.
China’s economy can maintain sustainable rates of growth despite global uncertainties, Vice President Wang Qishan said.
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.
Benchmark LME zinc ended up 0.8 per cent at $US2,640 a tonne after touching a seven-week high.
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 $US8.50 a tonne, the premium is far from a recent high of $US125.
LME tin finished up 1.1 per cent at $US20,925 a tonne after reaching a seven-month high.
LME copper closed down 0.5 per cent at $US5,922 a tonne, lead gained 2.3 per cent to $US2,073 and nickel rose 0.6 per cent to $US11,770.