Benchmark aluminium on the London Metal Exchange (LME) was down 0.5% at $2,396.50 a tonne by 1700 GMT after touching $2,387.50, its lowest level since Jan. 9.
Industrial metals surged in January, with aluminium reaching a seven-month high of $2,679.50 as speculators bet that growth in China, the top metals consumer, would rebound from last year's slump. Demand, however, remains lacklustre and metal is flowing into storage.
Aluminium stocks in LME-registered warehouses have risen to 602,150 tonnes from 375,950 tonnes in mid-January. Inventories in Shanghai Futures Exchange warehouses are at 268,984 tonnes, against 95,881 tonnes on Dec. 30. Meanwhile, a wave of speculative investment has slowed, with $2.3 billion leaving base metals markets last week, JPMorgan analysts said.
But inventories are still well below the long-term average, WisdomTree analyst Nitesh Shah said. Aluminium's fundamentals remain strong and China's demand for the metal should grow this year while its production shrinks, Shah said.
"There's a lot of potential for a very strong comeback (for prices)," he added.
Meanwhile, fears that higher interest rates will be needed to curb stickier-than-expected inflation continue to pressure stock markets and boosted the dollar, making dollar-priced metals costlier for many buyers. Analysts at Citi lowered their copper price forecast for the next three months to $8,500 a tonne from $10,000. LME copper was down 1% at $8,860 on Wednesday.
Citi said its economists believe that U.S. inflation will remain firmer than anticipated, necessitating three further increases to interest rates, each by 25 basis points.
"China growth could also disappoint amid continued property
sector struggles and weak consumer confidence," the bank added.
Benchmark zinc was down 2.2% at $3,014.50 a
tonne, nickel fell 1.4% to $26,100, lead slipped
1.8% to $2,057.50 and tin was down 0.7% at $26,625.
(Reporting by Peter Hobson; Additional reporting by Siyi Liu
and Dominique Patton;
Editing by David Goodman and Paul Simao)
LME price overview COMEX copper futures All metals news All commodities news Foreign exchange rates SPEED GUIDES ))
