Aluminum Rises as China Stockpiles Near 5-Year Low; Copper Slips

  • Chinese smelters producing fewer ingots, Citigroup says
  • Copper may fall to $4,000 over 12 months: Goldman analysts

Aluminum climbed as inventories tracked by exchanges in London and Shanghai declined, signaling tighter supplies. Most other industrial metals rose, while copper posted its biggest weekly loss in a month.

Stockpiles of aluminum held in Shanghai Futures Exchange warehouses fell this week to the lowest since 2011 and those tracked by the London Metal Exchange had the biggest weekly drop since 2006, data showed Friday. While the LME inventories have been moving to other locations, in China the decline is due to local smelters producing fewer ingots, a form of primary aluminum, according to Citigroup Inc.

“In China, there is less ingot availability at the moment,” David Wilson, an analyst at Citigroup in London, said by e-mail. “But we think this ingot tightness in China may well be just a temporary dislocation.”

Smelters are producing liquid aluminum instead of ingots to cut costs, Wilson said.

Aluminum for delivery in three months climbed 1.4 percent to settle at $1,645 a metric ton at 5:50 p.m. on the LME, posting a second straight weekly gain.

Metal Markets

Zinc, nickel and tin also climbed on the LME while lead declined. Copper fell as Goldman Sachs Group Inc. said a “supply storm” is coming and predicted prices will fall to $4,000 a ton over 12 months. Prices dropped 0.9 percent to $4,789, bringing the loss for the week to 2.8 percent.

Copper has lagged behind gains in other raw materials this year, especially zinc and nickel, which benefited from forecasts for global shortages. For copper, there’s been solid growth in global mine supply in the first half and that trend is expected to pick up in the coming quarters, according to Goldman.

“This ‘wall of supply’ is expected to translate in to higher copper smelter and refinery charges and ultimately, higher refined-copper production, set against softening demand growth,” analysts including Max Layton and Yubin Fu said in an e-mailed report.

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