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Shanghai aluminium prices recorded their first drop in eight days overnight as the market braced for the launch of a new smelter and on signs of a slowdown in demand ahead of the Lunar New Year holiday next month.

China’s Henan Shenhuo Group at the end of this month will start production at the first 150,000-tonne-per-year line of its aluminium smelting project in Wenshan prefecture, Yunnan province, company officials said on Thursday.

Aluminium on the Shanghai Futures Exchange (ShFE) hit a more than three-month high on Wednesday after a long rally supported by low inventories.

Stocks in warehouses monitored by the bourse have declined more than 70 per cent so far in the year and were at 193,820 tonnes on December 20.

“With the approach of the Spring Festival, the squeeze on warehouses has declined,” Everbright Futures analysts said in a note, using the Chinese term for the week-long Lunar New Year holiday.

The most traded February aluminium contract on the ShFE closed down 1.3 per cent at a one-week low of 14,055 yuan ($US2,008.34) a tonne.

ShFE copper rose for a third day, closing up 0.2 per cent at 49,650 yuan a tonne after hitting a fresh eight-month high of 49,940 yuan a tonne on easing US-China trade tensions.

China’s top copper smelters on Thursday at a meeting in Fuzhou raised their floor treatment and refining charges (TC/RCs) for the first quarter of 2020 by 1.5 per cent from the current quarter to $US67 per tonne and 6.7 US cents a pound.

Shanghai lead closed up 0.6 per cent on 15,215 yuan a tonne after jumping as much as 1.4 per cent to 15,340 yuan, its highest since November 29, in overnight trading amid stockpiling and a smog alert in the lead heartland of Henan.

Nickel closed up 0.3 per cent, zinc shed 0.4 per cent and tin nudged up 0.1 per cent.

The London Metal Exchange remained closed on Thursday for the Boxing Day holiday and will reopen on Friday.