Aluminium hits record high
London, July 10, 2008
Aluminium jumped to a record high on Thursday on output cuts in top producer China while lead surged 7.3 percent on news of lower stocks in London Metal Exchange warehouses.
Aluminium for delivery in three months rose to $3,350 per tonne, up 5 percent from Wednesday, after Chinese smelters said they would cut output by 5-10 percent from July to reduce power consumption.
By 1010 GMT, aluminium traded at $3,315/3,325 per tonne up against $3,190 at its previous session's close. "It is a short-term strategic decision to free up electricity for the summer. As demand has fallen away, they can afford to take some capacity away," analyst Leon Westgate at Standard Bank said.
Three-months lead was indicated at $1,900/1,920, up $110, after rallying to a high of $1,920. In the previous session, the metal gained over 10 percent, as available stocks in LME warehouses fell.
Total stocks stand at 101,175 tonnes, down 675 tonnes and cancelled warrants -- material prepared to be taken out of warehouses -- rose by 1,225 tonnes since Wednesday.
"Lead stocks are still relatively low at about five days of global consumption," said analyst Dan Smith at Standard Chartered. "The fundamentals are not fantastic but there is the prospect for a short-term bounce."
Energy-intensive aluminium, used in transport, packaging and power, has gained nearly 40 per cent since the start of the year, mainly due to power problems threatening supply in China.
On Thursday, China's top 20 aluminium producers agreed to cut production by 5-10 percent from July to push up aluminium prices and reduce power consumption, smelter sources said.
China's aluminium output is estimated at around 13 million tonnes per year, economist John Kemp at RBS Sempra Metals said. "If China's producers implement the agreed cutback ... the cuts will remove 600,000 to 1.2 million tonnes per year from the global market -- enough to eliminate the current surplus of around 1 million tonnes per year," Kemp said in a report.
As power availability tightens and energy prices rise, output growth is set to slow and the longer-term implication could be the elimination of several million tonnes of potential output growth in the next four years, Kemp said. On the back of the China news about the power savings, zinc rose 4.6 percent to an intraday high of $1,950 per tonne. It was indicated at $1,920/1,940, up from $1,865 on Wednesday.
Copper was steady trading at $8,190/8,200 against $8,200/8,210 on Wednesday, with prices under pressure from weakening demand in top consumer China.
China's imports of unwrought copper and semi-finished products fell 12.6 percent in June to 173,851 tonnes from May, according to initial data from China's customs bureau.
"The widening spread between the London Metal Exchange and Shanghai prices is negatively influencing Chinese imports," said Mark Pervan, senior commodities analyst at ANZ Bank.
The gap in prices between London and Shanghai copper futures widened to 3,624 yuan from 3,622 yuan on Wednesday, including Chinese value-added tax. The gap reached its widest ever at 6,719 yuan on July 3.
"We have seen a slowing import trend for a few months and this will likely continue in the future until the spread narrows. Either Chinese prices have to rise, or more likely, LME prices will fall."
Nickel was at $22,000/22,200, up $500 and tin was indicated at $23,050/23,150 up from $22,800/22,850. - Reuters