METALS-Falling inventories boost aluminium but surpluses lie ahead


Updates throughout, moves dateline from BEIJING

LONDON, Dec 20 (Reuters) - Aluminium rose on Tuesday, helped by a weakening dollar and a sharp fall in inventories available on the London Metal Exchange (LME), but rising COVID cases in China and expectations of surplus supply next year limited gains.

Benchmark aluminium CMAL3 on the LME was up 1.7% at $2,400.50 a tonne at 1144 GMT after 32,950 tonnes were earmarked for delivery out of LME-registered warehouses, lowering on-warrant stocks to 237,650 tonnes. MALSTX-TOTAL

LME aluminium inventories have been falling in recent weeks and stocks in Shanghai Futures Exchange warehouses, at 92,373 tonnes, are near multi-year lows. AL-STX-SGH

Yet prices of the metal used in transport, construction and packaging have declined in December and are down 15% this year due to a global economic slowdown.

"Demand is weakening, especially in China," said Citi analyst Wenyu Yao, predicting further price falls.

Citi expects the 65-70 million tonne a year market to be oversupplied by 900,000 tonnes next year, she said.

In China, the biggest metals consumer, cities scrambled to install hospital beds and build fever screening clinics amid a surge in COVID-19 cases that will likely disrupt economic activity.

Analysts expect economic stimulus measures but on Tuesday China's central bank kept benchmark lending interest rates unchanged and Chinese stock markets fell, echoing broader declines on global equities markets. MKTS/GLOB

The dollar weakened, however, helping dollar-priced metals by making them cheaper for buyers with other currencies. USD=

LME nickel CMNI3 surged 6.9% to $29,100 a tonne, erasing losses of recent days. A trader said liquidity was so low that buy orders were able to send prices sharply higher.

"We see nickel prices declining to $26,000 a tonne over the next three months and falling even further to $22,000 tonnes by the end of 2023," said Citi analyst Tom Mulqueen, predicting hefty surpluses for 2023 and 2024.

LME copper CMCU3 was up 0.5% at $8,362 a tonne, zinc CMZN3 was up 1.1% at $3,044, lead CMPB3 rose 0.3% to $2,165.50 and tin CMSN3 was 1.3% higher at $23,600.

(Reporting by Peter Hobson Additional reporting by Siyi Liu and Dominique Patton; Editing by Kirsten Donovan)


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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