Aluminium hit a six-month peak on Wednesday as the appetite for risk increased among investors who took a more upbeat view on the Chinese economy and saw commodities as relatively cheap. A bounce in oil prices also bolstered metals markets, helping send zinc to the highest since July last year and copper to a four-week high.
"I think there's some restocking coming through in China based on some stability in the economy and generally we're seeing some risk appetite coming back. There's a certain warming towards commodities in general," said Robin Bhar, head of metals research at Societe Generale in London. Three-month aluminium on the London Metal Exchange (LME) climbed 2.2 percent to close at $1,622.50 a tonne, the strongest since October 2015. Aluminium is the top gainer on the LME over the past month, up some 6 percent after producers cut output, but Bhar said he was wary about further gains, partly due to expected producer forward selling above $1,600.
"I'd be very cautious that anything can be sustained, particularly because we've had news that some of the Chinese smelters that cut output in December are now restarting." Primary aluminium output in top producer China climbed in March to 2.62 million tonnes from 2.07 million tonnes in February, data from the International Aluminium Institute (IAI) showed. LME copper ended up 0.9 percent at $4,981 a tonne, having touched the highest since March 23 at $4,985 and after gaining 2.3 percent in the previous session.
China's industrial output surprised to the upside last month, while rising property prices suggested an economic recovery was taking root.
"The break above $4,830-50 paved the way to a new short- term bullish trend targeting $5,140-$5,350," Gianclaudio Torlizzi, managing director at consultancy T-Commodity in Milan said in a note. Helping support metals was a rebound in the oil price after a smaller-than-expected US crude build offset worries about a supply glut stirred by the end of a Kuwaiti oil workers' strike.
LME zinc rose 0.2 percent to close at $1,940 a tonne, the highest since July 31, 2015, while sister metal lead finished 0.6 percent firmer at a three-week high of $1,771. Tin rose 0.3 percent to end at $17,200 a tonne and nickel gained 0.5 percent to $9,320.