Aluminum Hits Eight-Week Low as Metals Drop on China Demand Woesby
Metal slides after data showed Chinese economic growth slowed
Goldman sees downside risk to China copper demand growth
Aluminum dropped to the lowest in almost eight weeks as other industrial metals retreated amid mounting concerns about demand in China, the world’s biggest raw-materials consumer.
China Electricity Council cut its estimate on power-consumption growth this year after third-quarter usage failed to meet expectations, the Shanghai Securities News reported Tuesday. A looming bond default by Sinosteel Co., a Chinese state-owned steel trader, is highlighting the nation’s worsening corporate finances as an economic slowdown deepens. The country reported Monday the slowest quarterly growth since 2009, while its industrial output last month climbed less than the gain in August and the market consensus.
“It certainly paints a picture of weaker demand,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “Aluminum is still suffering from this oversupply situation.”
Aluminum for delivery in three months fell as much as 1.1 percent to $1,532.50 a metric ton on the London Metal Exchange, the lowest since Aug. 26. Prices extended declines after inventories in warehouses tracked by the LME rose for the first time since Sept. 28. The metal settled at $1,545 at 5:51 p.m. in London, down 0.3 percent.
Tomorrow is the third Wednesday of the month, when traders are obliged to settle their positions. One unidentified company held at least 40 percent of long positions in aluminum expiring this month as of Oct. 15, according to the LME data. Tightly controlled supplies make it more expensive for holders of short positions to roll forward their bets. The fee to borrow aluminum for one day on the LME jumped to as high as $7 a ton, the highest since May.
Zinc, copper, lead and tin also declined on the LME, while nickel advanced. On the Comex in New York, copper futures for December delivery slipped 0.1 percent to $2.3655 a pound.
"Until there is a fundamental global economic turnaround, metals prices seem to be destined to come under further pressure," Malcolm Freeman, a director of West Malling, England-based brokerage Kingdom Futures Ltd., said by e-mail.
Goldman Sachs Group Inc. sees risks for a 3 percent annual growth forecast for copper consumption in China from 2016 to 2020 skewed to the downside, it said in a report dated Oct. 19. The bank continues to believe China’s shift from heavy industry-driven old economy to consumer-driven new economy will likely be permanent.