Aluminium prices slipped on Tuesday as bearish speculators kept up selling pressure, while other base metals were lacklustre ahead of the conclusion of U.S.-China trade talks.
Aluminium has been the worst performer on the London Metal Exchange during the last two months on concerns about excess supply that gathered momentum after the United States said it would lift sanctions on Russian giant Rusal.
“I’ve been pretty gloomy on the aluminium market for some time and I expect more downside in coming months,” said Ross Strachan, senior commodities economist at Capital Economics in London.
“There are smelter re-starts in the U.S., a very large expansion in Bahrain, and in China you’ve got significantly more production than at this time a year ago,” he said.
“This is all coming at a time when demand is proving to be relatively soft and slowing in a number of the major markets.”
Aluminium closed down 0.8 percent at $1,864.50 a tonne in final open outcry trading, rowing back some of its rebound since touching $1,785.50 last week, the lowest in about a year.
* ALUMINIUM SPECULATORS: Aluminium has the biggest speculative net short position of the LME complex at 28 percent of open interest, a level not seen since November 2015, according to estimates by Marex Spectron detailed in a note.
* ALUMINIUM STOCKS: Excess supply was evident in a build-up of LME aluminium inventories MALSTX-TOTAL, which rose again on Tuesday, daily LME data showed. The stocks have surged nearly 40 percent since mid October last year.
* U.S.-CHINA: The United States and China will continue trade talks in Beijing for an unscheduled third day, a member of the U.S. delegation said on Tuesday, as the world’s two largest economies looked to resolve their bitter trade dispute.
The uncertainty was leading to muted activity, Strachan said. “I think people are holding back before we’ve got any news on the trade talks or the (U.S. government) shutdown, which is lingering in the background.”
* DOLLAR: The dollar index rose 0.3 percent, snapping a three-day losing streak, weighing on metals as it makes them more expensive for buyers using other currencies.
* COPPER TECHNICALS: Chart patterns are indicating that downside momentum has receded in copper, Stéphanie Aymes, head of technical analysis at Societe Generale, said in a note.
“Copper is now inching towards the upper band of the short-term down sloping trend at $5,980/$6,010… A break above will mean signs of a larger recovery towards $6,079 and more importantly $6,108/$6,170.”
* PRICES: LME copper fell 0.3 percent to end at $5,906 a tonne, zinc shed 0.5 percent to finish at $2,485, nickel gained 0.4 percent to $11,190, tin gained 1 percent to $19,940 and lead climbed 0.8 percent to $1,969.