Aluminium and zinc hit by inventory gains and demand uncertainty

Aluminium and zinc hit by inventory gains and demand uncertainty

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Aluminum and zinc prices retreated on Tuesday after inventories climbed, reminding investors that weak demand because of the coronavirus pandemic is likely to result in large surpluses.

Other industrial metals also slipped into the red along with oil and European stock markets as investors worried that rallies in riskier assets have moved too quickly to price in a recovery after lockdowns that froze many economies.

“I think caution is warranted. We need to see some of the macro indicators confirm the recent recovery in prices,” said independent metals consultant Robin Bhar.

“We’re coming into the summer months, so I’d be surprised to see prices carry on rallying from here.”

Benchmark aluminum on the London Metal Exchange (LME) was down 0.3% at $1,600.50 a tonne by 1430 GMT, giving up earlier gains. It has rallied nearly 10% over the past 3-1/2 weeks, touching its highest since March 20 on Monday.

STORY CONTINUES BELOW

Global aluminum inventories are expected to surge by 5 million tonnes by the end of the year to 16 million, much of it in hidden warehouses, according to consultancy CRU.

* ALUMINIUM STOCKS – LME aluminum inventories hit a three-year high of 1.54 million tonnes and have surged by 52% over the past three months, LME data showed.

* SHANGHAI PRICES – Before the LME stocks data was released, the most-traded July aluminum contract on the Shanghai Futures Exchange hit its highest in more than 4-1/2 months, closing with a 1.7% gain at 13,555 yuan ($1,915.31) a tonne.

* ZINC STOCKS – On-warrant LME zinc inventories jumped by 10,000 tonnes to 89,400 tonnes, data showed.

LME three-month zinc slipped 1.3% to $2,015 a tonne.

* STEEL – A fall in Chinese steel and iron ore prices pressured nickel and zinc, both used in the steel sector.

Nickel and zinc underperform this morning as the ferrous rally stalls,” Alastair Munro, of broker Marex Spectron, said in a note.

* OTHER PRICES: LME copper rose 0.8% to $5,747 a tonne, nickel shed 1.9% to $12,815, lead lost 0.2% to $1,756 and tin was up 1.8% at $16,970.

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($1 = 7.0772 Chinese yuan) 

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