Aluminum Jumps to Nine-Month High in Shanghai on Demand Outlook

SINGAPORE, July 24 -- Aluminum jumped to the highest in almost nine months in Shanghai, tracking an advance in London, on optimism a recovery in the global economy will boost demand.

    China, the world's largest producer and consumer of the light metal, imported more than 1 million metric tons of refined aluminum in the first six months of this year, 11 times higher than the same period a year ago, data from the Beijing-based customs office showed this week.

    "China is typically a net exporter of aluminum but has turned net importer since January," Jia Zheng, an analyst at Southwest Futures Co., said from Shanghai today. "Even though stockpiles are still very high, producer cutbacks since the global recession set in are slowly starting to take effect."

    Aluminum for November delivery on the Shanghai Futures Exchange rose as much as 2.4 percent to 14,260 yuan ($2,087) a ton, the highest since Oct. 30. It traded at 14,140 yuan at 10:36 a.m. Singapore time, up 3.7 percent this week.

    London Metal Exchange aluminum fell 0.8 percent to $1,770 a ton at the same time, after climbing as much as 2.5 percent to $1,788 a ton yesterday, the highest since Nov. 28.

    World aluminum production averaged 1.89 million tons a day in June, down 4 percent from 1.97 million tons in May, the International Aluminum Institute said in a July 20 report.

    "An improvement in the outlook for housing and automobile demand is helping the metal advance," said Jia.

    Aluminum has gained 15 percent this year in London as China's State Reserve Bureau expanded stockpiles and the government's 4 trillion yuan stimulus program spurred demand for the metal used mainly in automobiles, buildings and appliances.

    Economic Data

    Housing starts in the U.S., the world's second-biggest producer and consumer of aluminum, rose to a seven-month high in June as construction of single-family homes jumped by the most since 2004, signaling the housing market meltdown is ending.

    Ford Motor Co. yesterday posted net income of $2.26 billion, after an accounting gain, and a smaller operating loss than analysts estimated amid the worst auto market since the early 1980s.

    China's sales of cars and other passenger vehicles increased 48 percent to 872,900 last month, the China Association of Automobile Manufacturers said July 9. New-car registrations in Europe rose 2.4 percent to 1.46 million vehicles in June, the first gain since April 2008.

    Still, aluminum is the worst performer on the LME this year, as inventories tallied by the exchange stand at 4.55 million tons, levels not seen since at least 1979. The majority of this metal is tied up in financing deals, according to Standard Chartered Plc.

    Sharp Jump

    "This metal is unavailable for immediate delivery to consumers, meaning that prices can push higher in the short term despite this inventory overhang," the bank's analyst Dan Smith said in a note. "The resulting temporary tightness in the market has been reflected in a sharp jump in physical premiums in most regions."

    Among other LME-traded metals, copper lost 0.9 percent to $5,482 a ton, zinc fell 0.5 percent to $1,690 a ton and lead slid 0.9 percent to $1,730 a ton. Nickel dropped 0.9 percent to $16,250 a ton, while tin hadn't traded as of 10:56 a.m. in Singapore.

    (Source: Bloomberg)