Aluminum stops pushing after on-demand destruction warning
Aluminum has stabilized – after hitting its highest level since 2011 on Tuesday – as a Chinese industry group warned the metal’s dramatic rally was not supported by market fundamentals and could deter buyers.
Supply is not in a noticeable shortfall and consumption is not strong enough to justify such high prices, the China Non-Ferrous Metals Association said in its newsletter. Aluminum could retreat quickly once high prices impact demand and substitutions emerge, he said.
The metal has jumped nearly 50% over the past year as an increase in consumption due to the global economic recovery has coincided with production restrictions in China, the world’s largest producer. Energy-intensive industry has been targeted by Beijing as it seeks to save electricity and cut emissions, while a seasonal energy crisis has also rattled production. Guangxi province, an aluminum hub in southwest China, decided to cut production this week, researcher Mysteel reported.
Aluminum fell 0.7% to $ 2,700 a tonne on the London Metal Exchange at 8:15 am local time. The metal closed down 1.5% on the Shanghai Futures Exchange. Other base metals also fell, with copper falling 1.4% in London.
Speculators should not underestimate the determination of Chinese authorities to curb commodity prices, the non-ferrous metals association said. Commodity prices are likely to come under pressure as monetary policy is tightened around the world, he said.
Beijing is due to offer a third batch of metals on Wednesday, including aluminum, zinc and copper, from its state reserves. However, sales have so far not had much of an impact on prices or inflation, with many analysts predicting metals markets to remain tight over the next few months.
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