Aluminium succumbs to profit-taking

Aluminium has fallen as traders booked profits after prices soared to a 2-1/2 year high on Friday and factory data from top producer China fell short of market expectations.

Benchmark aluminium on the London Metal Exchange ended 0.9 per cent lower at $US2,023 a tonne, having reached its highest since November 2014 at $US2,048 on Friday.

“Today’s move in aluminium is more on profit-taking or low volatility in trade than a fundamental shift in sentiment,” said Hamza Khan, head of commodities strategy at ING Bank.

Recent weaker than expected economic data from China would not mean a reversal of a positive trend for aluminium, Khan added.

“We still expect capacity cuts from China to remain the main driving factor,” he said.

FACTORY DATA: China’s July factory output grew 6.4 per cent from a year earlier, while fixed-asset investment expanded by 8.3 per cent in the first seven months, both below economists’ forecasts.

OUTPUT: China Hongqiao, the world’s biggest aluminium producer, on Monday confirmed it had closed 2.68 million tonnes of smelting capacity after being ordered to do so by the government of its home province of Shandong.

China’s aluminium output fell 8.2 per cent in July from a record high a month earlier, data showed on Monday, as capacity cuts that have sent prices to multi-year highs start to take their toll on the country’s output.

LME STOCKS: Inventories of aluminium in LME-registered warehouses are near nine-year lows, having shed more than 40 per cent in 2017 to 1.3 million tonnes.

SHFE STOCKS: Shfe aluminium stocks , which have been climbing all year, hit their highest level since May 2013 at 473,000 tonnes.

DOLLAR: Industrial metals overall were pressured by a stronger US currency, which makes dollar-denominated commodities more expensive for non-US buyers.

SPREADS: Aluminium cash to three-month spreads have narrowed sharply, suggesting shorts are likely to deliver against their positions where possible as the prime traded contract expires this week.

COPPER: Benchmark copper ended 0.2 per cent down at$US6,397 a tonne. Prices hit their highest in more than 2-1/2 years on Aug. 9 at $US6,515 and are up almost 8 per cent this quarter.

TECHNICALS: Resistance remains into $US6,515 with support now between $US6,250 and $US6,300, said Marex Spectron broker Alastair Munro.

SPECULATORS: Hedge funds and money managers lifted their net long position in copper futures and options to a record level, US Commodity Futures Trading Commission data showed on Friday.

PRICES: Lead ended 0.3 per cent higher at $US2,335, tin was barely changed at $US20,300, zinc rose 0.7 per cent to $US2,917 and nickel ceded 2 per cent to $US10,450.

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