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Aluminium prices fell to five-week lows on Monday as surging inventories in London Metal Exchange (LME) approved warehoues hit sentiment, while copper was supported by Chinese data showing a jump in new bank loans.
Aluminium prices (LME) CMAL3 on the LME were down 1% at $2,416 a tonne from an earlier $2,410, the lowest since January 10. Copper CMCU3 was a touch firmer at $8,859 a tonne.
“The headline rise in stocks triggered the selling in the aluminium market and some positive data from China is helping copper,” a metals trader said.
Traders said transactions ahead of settlement on Wednesday could create volatility across metals on the LME.
LME aluminium stocks MALSTX-TOTAL at 576,775 tonnes have nearly doubled since Feb. 6, easing fears about shortages and supplies on the LME market.
Aluminium AL-STX-SGH inventories in warehouses monitored by the Shanghai Futures Exchange at 268,984 tonnes are up about 180% since end-December, which analysts say is a reflection of weak demand in top consumer China.
However, a jump new bank loans in China to a record 4.9 trillion yuan ($720.21 billion) last month, suggesting the country’s central bank is looking to kickstart growth after the lifting of COVID controls, is a plus, traders said.
“It’s a positive, but it will take time to feed through,” a trader at a commodity focused fund said. “Meanwhile the macro elements are still very much in play.
Macro elements are a reference to the U.S. Federal Reserve and its decisions on interest rates, which help determine dollar direction. Clues to Fed policy will come from U.S. consumer price data on Tuesday.
A higher U.S currency typically makes dollar-denominated metals more expensive for holders of other currencies, which could subdue demand for industrial metals.
Meanwhile, rising zinc stocks MZNSTX-TOTAL in LME warehouses have eased worries about availability on the LME. This can be seen in the narrowing premium for the cash over the three-month contract CMZN0-3.
Three-month zinc CMZN3 was down 1.1% at $3,009 a tonne.
In other metals, lead CMPB3 was up 0.8% at $2,095 a tonne, tin CMSN3 added 0.1% to $27,375 and nickel CMNI3 slipped 3.6% to $26,790.