Aluminium slipped to a five-week low on Tuesday after a steep drop in oil prices weighed on the energy intensive metal, while lead surged to a 9-week high due to falling Chinese exports. Aluminium traded on the London Metal Exchange (LME) touched a low of $3,004.75 a tonne after oil prices dropped by over $4, before the metal recovered slightly to close at $3,035 from $3,045 on Monday.
Lower oil prices - used as a proxy for energy in general - tend to reduce the price of aluminium, as up to 45 percent of aluminium's production costs come from power. However, the metal used in transport, construction and power has been boosted this year by worries about supplies from China, the world's top producer, where power disruptions have hit smelters.
A Reuters poll of 22 commodity analysts around the world released on Tuesday forecast a global surplus of 148,500 tonnes of aluminium in 2008, dropping from predictions for a 325,000 tonnes surplus in January. China has forecast a power shortfall of 10 gigawatts for the summer, about 1.4 percent of installed capacity, but provinces are forecasting more than triple this.
Aluminium has risen by 27 percent since the start of the year, hitting an all-time high of $3,380 a tonne on July 10 after China's 20 largest smelters announced production cuts in a bid to conserve energy. News that China's exports of primary aluminium fell 30 percent in June and declined 65 percent in the first half of the year would help support prices, traders said.
Lead soared by over five percent at one stage, hitting $2,160 a tonne - the highest level since May 22. Lead closed at $2,140 a tonne from $2,050 on Monday, with news Chinese exports of refined lead dropped 96 percent in June and fell 80 percent in the first half buoying prices.
Falling stocks of lead have helped the battery-material this week. Lead stocks in LME warehouses fell 650 tonnes to 91,375, down about 10 percent since July 9. Copper inched higher on Tuesday as worries about supply shortages resurfaced, though concerns over the strength of Chinese demand capped gains.
Copper closed at $8,130 a tonne from $8,120 on Monday, while US copper for September delivery slipped 0.30 cent to $3.6780 by midday in New York. Zinc closed at $1,845 a tonne from $1,865, nickel eased to $20,500 from $20,550 and tin was at $23,450 from Monday's last quote of $23,500/23,600.