Weak industrial data in top base metals consumer China weighed on prices on Tuesday, while aluminium took a breather but was expected to resume its rally as US sanctions disrupt supplies from the world's No. 2 producer Rusal. Chinese industrial output expanded 6.0 percent in March year-on-year, the slowest pace in seven months, while fixed asset investment for January-March also came in below expectations.
China's economy, however, grew 6.8 percent in the first quarter of 2018, slightly faster than expected. "IP and fixed asset investment missed the consensus so that was a dampener and put a bit of constraint on the metals," said Robin Bhar, head of metals research, Societe Generale. A fall in German investor morale to the lowest level since November 2012 and a firmer dollar also knocked sentiment.
Benchmark aluminium on the London Metal Exchange was volatile, touching a 6-1/2 year peak of $2,435, then slipping into negative territory in early European trading. It closed little changed in final open outcry trading, up 0.3 percent at $2,405 a tonne. "With all the uncertainty around Rusal, there's no way but for the price to head higher still to incentivise more production from elsewhere," Bhar said.
While a fair price was around current levels, speculators and investors could take it as high as $2,800-$3,000, he added. "We will go above fair value because of the unprecedented situation and the involvement of speculators and investors." United Company Rusal accounts for 6-7 percent of global aluminium supply. More aluminium arrived into LME warehouses, which traders said was likely to be Rusal material, pushing up LME inventories by 52,125 tonnes to 1,412,400 tonnes, the highest since June last year.
Major Japanese trading houses have asked Rusal to stop shipping refined aluminium and other products in light of US sanctions and are scrambling to secure metal elsewhere, industry sources said. LME copper shed 0.5 percent to finish at $6,877 a tonne after on-warrant LME stocks, those not earmarked for delivery, climbed 10,950 tonnes to 313,450 tonnes, indicating healthy supplies.
Nickel fell 0.8 percent to end at $14,215 a tonne. With nickel the biggest speculative long of the LME complex, according to estimates from broker Marex Spectron, it appeared some bulls were liquidating positions, traders said. Zinc closed up 0.6 percent at $3,154 a tonne, lead dropped 0.8 percent to $2,350 and tin shot up 2.1 percent to $21,475 a tonne.