Aluminium fell as much as 3.0 percent on Tuesday on demand concerns as inventories continued to soar and the weaker dollar offered little support. Aluminium stocks in London Metal Exchange warehouses jumped 49,000 tonnes to above 2.3 million tonnes and have soared more than 475,000 tonnes this month alone.
"The focus is still on rising stocks and poor demand across the sector," said Stephen Briggs, commodity strategist at RBS Global Banking & Markets. "Most people think aluminium stocks are going to continue to rise for a few weeks yet." Aluminium for three-month delivery on the LME fell to a low of $1,465 a tonne. The metal, used in transport and power, closed at $1,495 a tonne from $1,511 on Monday.
Aluminium "has been holding up fairly well over the last week despite rising stock levels, but at some point, these accumulations become too large to ignore," said MF Global in a research note. The dollar slipped further, making base metals cheaper for holders of other currencies, but offered little support.
Three-month nickel prices jumped as much as 11 percent to $10,749 a tonne as traders squared positions in anticipation of the year-end. It closed at $10,710 against $9,700 a tonne on Monday. "We are coming up to the last trading day of the year, and a lot of people are squaring up the books," said an LME metals trader.
Copper, which has dropped almost 60 percent this year, was also lower at $2,910 a tonne from $2,905. Copper inventories rose 650 tonnes to 337,350, the highest level since February 2004, as production cuts so far have failed to keep pace with lower demand. Copper output from Chile, the world's biggest producer, fell 6.4 percent in November from the year earlier.
Aluminium inventories have surged to the highest level since September 1994. Rising stocks have capped a rally that aluminium attempted last week following figures from the International Aluminium Institute that showed production cutbacks were starting to have an impact, said Briggs.
Zinc prices, which peaked at $4,580 a tonne in November 2006, were trading at $1,150 a tonne compared with the last bid of $1,158 on Monday. Lead was last bid at $954 from $920, while tin jumped to $10,000 from the last bid of $9,750 a tonne on Monday.