Off The Wire
METALS-Surging stockpiles push aluminium prices to 2-month low
* LME/ShFE arb: (Updates throughout, moves dateline from BEIJING)
By Peter Hobson
LONDON, Feb 14 (Reuters) - Aluminium prices fell to their lowest in two months on Wednesday after a rapid buildup of stocks in exchange warehouses suggested ample supplies of the metal.
Benchmark aluminium on the London Metal Exchange was down 0.5 percent at $2,127.50 a tonne at 1139 GMT after touching $2,112.50, the lowest since Dec. 20.
Expectations that a crackdown on polluting smelters in China, the world's biggest producer and consumer, would reduce global supply helped drive aluminium prices to the highest in 6 years in late December.
But stockpiles in LME-registered warehouses have surged by more than 200,000 tonnes since late last week to nearly 1.3 million tonnes, while inventories in Shanghai Futures Exchange warehouses continue to build after rising more than 600 percent last year. "There is obviously ample supply of aluminium in China and therefore scope to export at least some of that material," said Commerzbank analyst Daniel Briesemann.
"The big inflows into LME warehouses point to subdued demand in China," he said, predicting prices could fall beneath $2,000 a tonne.
The rise in stockpiles was also a reminder that around 7 million tonnes of aluminium were sitting outside the exchange warehouse system following market surpluses in recent years, said Julius Baer analyst Carsten Menke.
TECHNICALS: Aluminium has fallen below its technically important 50- and 100-day moving averages. Fibonacci support was at $2,110 a tonne.
POSITIONING: Brokers Marex Spectron said speculators were betting on lower prices, with their net short position in LME aluminium at 6.6 percent of outstanding contracts.
U.S. TARIFFS: President Donald Trump said he was considering options to address steel and aluminium imports including tariffs and quotas. This would likely drive up prices in the United States but have less impact elsewhere, Briesemann said. HOLIDAY: The Shanghai Futures Exchange will be closed from Thursday through to Feb. 22, reducing trading activity.
DOLLAR: The dollar has weakened this week, supporting metals by making them cheaper for users of other currencies. U.S. January inflation data due at 1330 GMT could impact the exchange rate. YUAN: Economists polled by Reuters said the Chinese yuan would erase most of its substantial gains so far in 2018 against the dollar, reducing the buying power of Chinese investors. GERMANY: Expectations of robust demand for metals were bolstered by data showing robust growth in Germany, Europe's biggest economy. OTHER METALS: Copper was up 0.1 percent at $6,995.50 a tonne, zinc was down 0.1 percent at $3,467, lead had lost 0.2 percent to $2,556, tin was 0.5 percent higher at $21,600 and nickel was up 1.2 percent at $13,615.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Top Base and Precious Metals Analysis - GFMS LME/ShFE arb: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Tom Daly; Editing by Keith Weir)