Aluminum Slumps by Limit in Shanghai on Production Speculation
Aluminum slumped by the exchange- imposed daily limit in Shanghai on speculation producers in China, the world’s biggest supplier, may not reduce output as much as expected as input costs drop.
Aluminum Corp. of China Ltd., or Chalco, China’s largest producer, has reduced alumina prices three times since June. Two tons of alumina yield one ton of aluminum. Energy costs, which account for as much as half the cost of making the metal, have dropped as crude oil has fallen 58 percent in the same period.
“Energy costs and alumina costs have fallen and this makes aluminum cheaper to produce,” Wang Zhouyi, an analyst at China International Futures (Shanghai) Co., said today. “With export rebates being re-introduced, Chinese smelters may once again ramp up production even though global inventories are so high,”
The metal for February delivery on the Shanghai Futures Exchange fell as much as 530 yuan, or 4 percent, from the previous settlement price, to 12,635 yuan ($1,849) a metric ton, and closed the day at that level.
Aluminum fell 0.6 percent to 1,780 a ton on the London Metal Exchange at 4:20 p.m. in Singapore. The metal is up 1.7 percent this week, heading for its first weekly gain this month.
China’s aluminum production fell 2.6 percent in October as Chalco and other smelters reduced output, according to the International Aluminium Institute.
China will increase tax rebates on exports of aluminum plates and strips next month, the Ministry of Finance said Nov. 17. The ministry will also cut the export tariff on aluminum alloy rods and bars with a circumference of less than 210 millimeters (8.3 inches).
Rising Inventories
Stockpiles of the metal used in cars and airplanes stood at 1.8 million tons yesterday, the highest since December 1994. Goldman Sachs JBWere Pty said Nov. 26 that aluminum supply may exceed demand by 2.18 million tons in 2009, rising from an excess of 1.60 million tons this year.
Costs “could fall to around 12,000 yuan a ton in coming months,” Liu Na, an analyst with Scotia Capital, a unit of Toronto-based Bank of Nova Scotia, Canada’s third-largest bank, said Nov. 25.
Among other LME-traded metals, copper fell 0.7 percent to $3,672 a ton, zinc was unchanged at $1,220 a ton, nickel slipped 1 percent to $10,151 a ton, and tin fell 0.8 percent to $12,400. Lead was up 2.3 percent at $1,130 a ton as of 4.24 p.m. in Singapore.
Tags: aluminum, Metal