Marubeni says LME aluminium prices may rise towards $2,300 a tonne next year

London Metal Exchange (LME) aluminium prices are forecast to rise gradually in the latter half of next year possibly to as high as $2,300 a tonne as smelter shutdowns and output cuts squeeze supply, Japanese trading house Marubeni Corp said.

"We expect the LME prices to move higher next year as the market will remain tight," Norinobu Ozawa, general manager at Marubeni's light metals section, told reporters on Wednesday.

Marubeni, a major aluminium trader in Japan, estimated the global aluminium market will see a deficit of 387,000 tonnes in 2015, against an estimated deficit of 125,000 tonnes this year. It sees the deficit to widen to 872,000 tonnes in 2016.

Many aluminium producers have cut loss-making capacity or shut down completely in response to low LME prices, high energy costs and a flood of new capacity from China.

"Given the slack LME prices, high-cost producers will be forced to reduce or end production next year," Ozawa said.

LME aluminium prices, which have gained about 4 percent this year, traded at around $1,875 a tonne on Wednesday.

Marubeni forecast that they would be between $1,900-2,300 in the third and fourth quarters next year, moving up from an expected $1,800-2,200 range in the first quarter.

Global aluminium demand is expected to grow by over 5 percent in 2015 and 2016, led by a solid recovery in the U.S. economy and steady growth in emerging countries, Marubeni said.

The trading firm also forecast that the squeeze on supply would lead to higher premiums in Japan next year, predicting the range between $400-480.

Japan is Asia's top aluminium importer and the premiums it pays set the benchmark for the region. This year, Major Japan Port (MJP) premiums have risen 64 percent to record $420.

Earlier this month, major aluminium producers asked Japanese buyers to pay record premiums of $435-$440 per tonne for January-March deliveries, up as much as 4.8 percent from the previous quarter. But no agreements have been made as buyers demand lower prices.

Global aluminium premiums are expected to reach fresh record highs by mid-2015 on a supply deficit in the United States and Europe, according to a Reuters survey. 

Novelis declared as the supplier of aluminum to new Jaguar XE

Jaguar XE, was recently launched in Europe, and will arrive in North America in the year 2016. The company stated that, the new Jaguar XE, is the first launched in the mid size segment, to preview an aluminum based intensive body structure.

The designs of the car are featured by the Novelis Advanz 6000 series alloys, which had been developed by the company, especially for automotive skin sheet and also the structural appliances of vehicles. The construction of new Jaguar XE, makes the car, highly strong and also considerably light weight, which contributes to the fuel efficiency of the vehicle, and also reduces the emission of the vehicle.

The Vice President as well as the General Manager of the Novelis Europe Automotives, Pierre Labat, declared that the company had selected to supply aluminum sheets for the recently launched Jaguar XE, in order to make the vehicle more novel and also light weight.

He also stated that, the launch of XE, once again regains the leadership of Jaguar Land Rover. In both the design as well as in the production of high volume aluminum vehicles. He added that, this could be stated as an important milestone for the company in body engineering as well as to redefine the standers in its class of vehicles

Japan Aluminium stocks hit record high on increased imports

Aluminium stocks held at three major Japanese ports rose for an eighth straight month to hit a record high at the end of November on rising imports and softer demand at home.

Aluminium stocks held at Yokohama, Nagoya and Osaka rose 14 percent in November from a month earlier to 378,000 tonnes, the highest level in data going back to April 2000, trading house Marubeni Corp said on Friday.

"An increased number of aluminium ingots are coming to Japan to look for buyers amid slowing demand elsewhere in Asia as China steps up exports of cheaper aluminium products to neighbouring countries," said a Tokyo-based trader, who declined to be named.

Japan's import of aluminium ingot rose 16 percent to 1.43 million tonnes in the January-October period from the same period in 2013, according to the country's trade data.

The inventory increase also reflects slowing demand in Japan as consumption and exports remain weak, another trader said.

The world's third-largest economy has unexpectedly slipped into recession. Gross domestic product (GDP) shrank an annualised 1.6 percent in the July-September quarter after plunging 7.3 percent the previous quarter following a rise in sales taxes that clobbered consumer spending.

Recent economic data have also remained weak with falling machinery orders and inflation expectations, depressed sentiment in a government "economy watchers" survey and feeble capital-spending plans. 

U.S. aluminum imports highest for October since 2008

U.S. aluminum imports in October were at their highest for the month since 2008 as bigger inflows from Canada offset a slowdown in material from Russia, according to International Trade Commission data released on Monday.

Imports totaled 268,000 tonnes in October, up 18 percent from a year earlier and an 11 percent rise from the prior month, for third-highest monthly total so far this year.

The bulk of the inflows came from Canada, typically the top foreign supplier into the United States, with about 1.91 million tonnes coming across the border, up 17 percent from October 2013 and a rise of almost a quarter from September.

The Canadian imports were the second-highest for the year so far and came even as Rio Tinto has closed older Soederberg-technology potlines at its major Kitimat smelter as part of a major modernization of the technology.

The smelter's output fell in the third quarter, but that will ramp up next year as the facility fires up expanded capacity of 420,000 tonnes per year.

The upswing from Canada in October bucks an overall downtrend for the year to date. Canadian imports are down 4 percent at 1.65 million tonnes from a year earlier.

The overall rise in imports reflects a general trend so far this year as soaring premiums that fabricators and merchants pay on top of benchmark London Metal Exchange prices for delivery to the Midwest lure units to the United States.

Cuts in domestic smelting capacity due to low LME prices and high energy costs have also forced companies that use aluminum in cars and construction to buy more metal from abroad, from countries such as Saudi Arabia.

Aluminum hikes up in the US as demand surges

After declining at the lowest point yesterday since the month of July in the year 2013, aluminum has again regained its posture by increasing its value to 0.3 percent. According to the reports which were published in the month of November, the annual consumption of the automobile industry has been noted as 17.2 million tonnes. The records from the month of October shows that the consumption of aluminum from the construction industry has increased by about 1.1 percent.

A Senior Fund Manager at the Astmax Asset Management Inc, located in Tokyo, Testu Emori, stated that the US based sale of aluminum based automobiles is  very much impressive in number. He also added that the consumption of aluminum in the construction industry is also  positive, and this could bring up tremendous effect on the market of the base metal.

In, London Metal Exchange, the aluminum stored in the warehouse awaiting for delivery has increased 0.3 percent, and has reached 1,983.85 dollars per tonne.

Alcoa modernizes aerospace industries

The company, has also planned on to install modern manufacturing facilities in its plants, in order to ensure the high performance of aluminum-lithium plate as well as thick aluminum which is to be used in various applications including, fuselage frames as well as wing ribs.

The company’s investment in the plant would also include the installation aluminum plate stretcher, which would be used in the production of the commodities. The main use of the stretching process in the material is that, this procedure would, make the part of the plate, to be easily processed as well as machined. This brand new technique and method would enable the production of largest as well as high strength monolithic wing ribs in the whole aluminum industry.

Large wing ribs posses lack of strength and stiffness in the product. But in the case of the products produced in Alcoa, the aluminum stretcher would make sure that such a pressure does not take place in the produce.

The President of Alcoa Aerospace, Transportation and Industrial Products, Mark Vrablec, stated that,  the project intiated by the company, would be its key to progress in the aerospace industry. 

China’s electric car production encourages the rise in demand for aluminum

The world’s largest producer of carbon fumes, China, has decided on promoting electric cars by replacing about 30 percent of the government vehicles with a new electric power charged vehicles, with an agenda of reducing the rate of air pollution and also conserving the resources.

The present estimation of the demand of aluminum , based on the production of cars in China, South Korea and Japan, is likely 50,000 metric tones, and there is now a chance of 30 percent hike in aluminum demand, for as long as next decade, stated the President of Novelis, Shashi Maudgal.

He also stated that, China, is now under a strong determination to increase the production and usage of electric based cars. If the government decides on using this plan all over the country, then the demand will increase over 30 percent.

Today the company, is inaugurating its brand new aluminum plant in china, located in Changzhou, which is situated about 180 kilometers away from Shanghai. The new aluminum plant is expected to produce about 120,000 tonnes, of aluminum auto body sheets.

Whether the company has already fixed their customers, or are in communication regarding the supply are still unknown. Anyway the expected car companies in the list are SAIC Motor Corp and Chery  Jaguar Land Rover Automotive Company Limited.

Aluminum faces decline in production after 8 years

During the first half of the year 2014, many Chinese smelters shut down under the label of increasing charges of electricity and also declining profit. In addition to the estimated 1.3 million metric tonnes, which cut down in the year of 2013, about 1.4 million metric tones of copper were cut down in the year half of 2014.

The Chinese smelter now came to the realization that the profit rate is increasing and the companies have planned to start and increase the production by the end of this year. Even though the come back Chinese smelters are a relief, but they will have to face a lot of challenges starting from, the way to achieve constant profits, steady supply of bauxite and alumina and also the availability of a cheap source of energy.

Other than the Chinese producers the western producers have also cut down their outputs. Rusal, the Russiahn aluminum producer, declined its production by 324,000 metric tonnes in the year of 2013, and is also anticipating on declining the production of copper to about 3.55 metric tonnes.

Natixis predicts 275,000 mt deficit for global aluminum market in 2014

The French bank Natixis has predicted deficit for global aluminum market in 2014. The bank forecasts a deficit of 275,000 mt in 2014- the first annual deficit in eight years, primarily on account of large scale production cuts and rising aluminum demand across the globe.

According to Natixis, the global aluminum supply will total 49.2 million mt, whereas global consumption is likely to total 49.475 million mt, thus resulting in a deficit of 275,000 mt deficit.

Large number of Chinese smelters cut production during 2013 and H1 2014, due to rising power costs and falling profit margins. Cutbacks totaled approximately 1 million to 1.3 million mt in 2013 and 1.4 million to 1.8 million mt during first half of the current year. However, the bank predicts that many of these facilities may come back online during the last quarter of 2014.

In addition, Rusal had cut its aluminum output by 324,000 mt in 2013. The company also aims to further reduce its aluminum production by another 323,000 mt this year. Similar production cuts were implemented by Alcoa through closure of its smelters in Italy, Australia and Brazil.

Natixis forecasts global aluminum supply to reach 51 million mt in 2015. The global consumption will total 52.2 million mt, thus resulting in a deficit of 1.2 million mt. Furthermore, the bank predicts 5.5% growth for global aluminum demand in 2014 and 2015, followed by 6% growth in 2016.

Alcoa’s results rally domestic aluminum producers

 According to the announcements, which were made last week, National aluminum and also Hindalco industries, improved to a higher extend, after the rise in Alcoa, exciting the investors.

The most  important reason  behind such a sudden improvement is realizations. The realization of Alcoa, that the price of aluminum rose in the month of June, with a 10.8 percent increase due to the rise in the price of aluminum in the London Metal Exchange, and due to the hike in the region. These are the premiums which are paid by the customers in order to have the metal delivered faster.

Along with happy moments, the rise promoted by Alcoa, there is also Cautionary note tagged along. For one whole year, the company has maintained its aluminum protection demand at about 7 percent. So this force one to think that, if china who contributes about 48 percent of the consumption, decides to decline its rate of consumption as a part of the country’s creeping economy rate.

From this realization another risk is also developing, that as the price rises, the closed smerlter4s which had to halt due to the lowering value of the metal would suddenly start reappearing. The report states that, this procedure has already started taking its turn in China. 

No Big Turnround Expected in Aluminum Market.

The longs are not advised to enter the aluminum market, as no big turnround is expected to happen in the aluminum market during October, one CIFCO analyst told SMM in a recent interview. 

“The policy-front action and demand conditions will determine October’s aluminum market”, the analyst said. 

A moderate development of global automobile market will allow for a relatively balanced aluminum market in China as long as the resumption in domestic aluminum industry is at a slow pace, the analyst added.   

Morgan Stanley raises 2015 Aluminum price forecast by 8%

Morgan Stanley has upgraded the price forecast for Aluminum for 2015 by 8%. The financial service major has also increased the current year’s price forecast by 3%. This is on account of the boost in aluminum usage by the automotive industry around the globe, especially the US. Moreover, Morgan Stanley also believes that supply is most likely to subside further as more producers turn to production cuts.

According to the latest report by Joel Crane, the price forecast for this year has been increased to $1,893 a ton, 3% higher than the previous forecast. Also, Aluminum prices will touch $2,072 a metric ton in 2015, he added. The global surplus of Aluminum will be 620,000 tons this year. But the surplus will narrow down to 310,000 tons in 2015 and 280,000 tons in 2016. The report further states that the global Aluminum market will swing to 230,000 tons of deficit in 2017.

The cut in production coupled with strong demand growth presents a bright future for the metal. The global aluminum demand is expected to grow 6.6% in 2014 and 7.4% in 2015, mainly on the back of increased demand from US car industry and strong consumption growth in China. The increased use of aluminum in F150 by Ford will boost the demand in near term. Another automobile major Toyota has already announced its plans to use more aluminum in 2018 model of Camry.

Global demand will climb 6.6 percent this year and 7.4 percent next year as carmakers, mostly in the U.S., increase use of the metal and growing consumption in China, the bank said. The increased use of aluminum in Ford Motor Co.’s new F150 is a “boon for aluminum demand” and Toyota Motor Corp. plans to use more of the metal in its 2018 Camry, it said.

Morgan Stanley has raised the current year estimates for Nickel and Zinc by 2% each. The 2015 price forecast for copper was cut by 3 percent to $7,176 per ton.

UK court to issue ruling in London Metal Exchange/Rusal case

(Reuters) - The Court of Appeal in London is due to hand down a decision on Wednesday in a case determining whether the London Metal Exchange (LME) can implement tough new rules to reduce the waiting times for withdrawing metals from the industry's warehouse stores.

A three-judge panel will either overturn or uphold a March ruling in favour of Russian aluminium company United Company Rusal that halted a key LME warehouse reform.

The decision is scheduled for Wednesday morning, according to the website of the Court of Appeal.

The original judgment ruled against the LME, the world's biggest industrial metals market, because the court regarded the consultation process as "unfair and unlawful".

The LME's new rules, originally due to take force in April, were aimed at making owners of warehouses deliver out at least as much metal as they take in.

But Rusal, the world's largest aluminium producer, feared the reforms could unleash a flood of supplies onto the market and depress aluminium prices.

Judges "reserved judgment" after a two-day hearing in July which revolved around the consultation process, not the actual warehouse reforms sought by the LME, which is now owned by Hong Kong Exchanges and Clearing Ltd 

Benchmark LME aluminium prices have shed about 30 percent since touching a peak around $2,800 a tonne in May 2011.

Industrial buyers of aluminium, used in transport and to make beverage cans, have had to wait up to two years to get delivery of metal from some LME warehouses and the new rules aim to cut the queues down to a maximum of 50 days.

Goldman Sachs Sees Aluminum Deficit to Lift Prices

 Goldman Sachs projects that LME aluminum price will rise from $ 1,869 per tonne in 2014 to $ 2,150 per tonne in 2017, citing that aluminum market will swing into deficit during the 2014-2017 period, news fund 123 reported on September 26. 

Automotive Demand Prompting Aluminum Deficit Predictions

Aluminum looks set to continue its comeback this year as automotive companies increasingly turn to the metal over traditional steel.

 

Ford, Jaguar and Toyota have all made high-profile switches to using the metal in vehicle production, while marine companies are forecasting greater demand for aluminum -built liquefied natural gas (LNG) carriers.

Time for a turnaround

 

Aluminum prices have dropped over the past few years because of an excess of global production,according to Bloomberg, but a projected deficit is helping the price gather pace. Indeed, in a recent Reuters poll, seven out of 14 analysts predicted an aluminum market deficit for 2015 — encouraging news given the fact that the global aluminum market has been in a surplus for nine years.

 

Prompting the reversal is the fact that some companies, like Rusal and Alcoa, have cut aluminum production in an effort to correct what has been a market saturated with product. As a result, the metal has been on a steady increase this year, and is currently hovering at $0.88 a pound. It’s up about 10 percent for the year and in August reached an 18-month high on the back of speculation of rising demand and US economy growth.

 

What’s driving the increase?

 

As mentioned, it’s the fact that the metal has been tapped for use in new car models — as well as in the production of ships that carry LNG — that is helping boost its price.

 

Ford announced in August that its F-150 model will be produced with more aluminum, a move that will shave roughly 700 pounds from the F-150 and boost its fuel economy by an average of 7 miles per gallon. The metal already makes up about 75 percent of the Jaguar XE sedan’s components.

 

The latest in the line of automotive companies to make the switch is Toyota, which is going to be using aluminum in the production of hoods for its Camry. Speaking to AutoNews, spokeswoman Jana Hartline said: “Toyota has plans to use aluminum on future vehicles for hood, closures and parts for lightweighting.”

 

The reason behind the switch is a desire to better meet corporate average fuel economy regulations. A lighter car theoretically would have better fuel efficiency and therefore meet stricter fuel emissions laws. In all, aluminum demand is expected to double in the auto industry by 2025.

 

Not only car companies are looking to use the lightweight metal for production. Aluminum is also widely used in the marine industry due to its resistance to corrosion and fuel efficiency, and companies are boosting aluminum output accordingly.

 

For instance, UACJ, the world’s third-largest producer of rolled aluminum products, is expanding its capacity for sheets to be used in LNG carriers by 50 percent to meet rising tanker demand.

 

In an interview with Bloomberg, Hiroshi Hashimoto, a senior analyst at the Institute of Energy Economics, called the demand “unprecedented” and said the Asian country will need more than 20 new LNG carriers.

 

The time is right

Reuters has warned investors that the aluminum deficit may be short lived due to potential Chinese stockpiles, which, if released, will likely bring the metal’s price down. However, given that the size of any potential stockpile in China is unknown, the potential for higher aluminum prices remains.

Similarly, FastMarkets recently cautioned investors to move quickly to take advantage of favorable prices. That said, it estimates that the price of aluminum will hit an average of $1,900 by the end of 2014, up from roughly $1,800 at the end of 2013.

Record high aluminium premiums lift 2015 cost outlook

* European duty-paid spot premiums at record $460-480/T

* Shorter-term supply contracts seen for 2015

* Strong industrial demand, supply cutbacks tighten market

 

Aluminium supply contracts for consumers in Europe are likely to almost double next year as spot market premiums - the cost to get metal immediately - rise to record highs on rising demand and supply cutbacks.

 

Premiums, paid over the London Metal Exchange (LME) cash prices , have lurched higher in September to fresh record highs of $460-480 a tonne for duty-paid material in Rotterdam, from $450-460 last month.

 

Premiums have risen more than 60 percent since the beginning of the year, due to a combination of rising demand and some supply cutbacks from Western producers.

 

Traders said uncertainty about the outlook for premiums is likely to prompt consumers to push for quarterly contracts with producers rather than locking-in annual supply deals.

 

"We're expecting that customers will have to pay close to current premium levels. If you compare it to last year, you could still do deals at around half the cost," a physical aluminium trader said.

 

"A lot of people think premiums are at their peak and you won't want to fix at those levels for a year," he said.

 

Last year, premiums were agreed at around $250-280 a tonne, with consumers favouring shorter-term deals due to uncertainty about the outlook for premiums.

 

Yearly negotiations are set to begin in late October during LME Week, an annual gathering in London of the global mining community, but traders said contracts are unlikely to be concluded until at least November.

 

Supporting the outlook for premiums in Europe, some fourth quarter premiums in Japan were agreed at record highs of $420, and in the U.S. Midwest premiums are also trading at record highs of 21 cents/lb. 

The LME <0388.HK> last week announced a slight delay to the launch of its aluminium premium contract to the second quarter of next year. The exchange hopes the contract will appeal to investors wanting to lock in future premiums, which have been partly inflated by backlogs at LME-registered warehouses.

 

 

TIGHTENING

 

After years of chronic oversupply, the aluminium market is beginning to tighten as Western producers cut production to battle rising costs, Indonesia bans bauxite ore exports and demand for aluminium rises, particularly from U.S. auto makers.

 

A Reuters poll in July showed analysts expect the aluminium market to slip into a 444,000 tonne deficit in 2015, its first deficit in nine years. 

 

Overproduction in China and historically high inventories in LME-registered warehouses, however, will put a cap on further price rises, traders said.

 

Estimates of aluminium inventory outside China are at around 12 million tonnes. In LME-registered warehouses alone, stocks amount to nearly 5 million tonnes, although they have fallen by around 10 percent since the beginning of the year.

 

"A lot of aluminium is going out of LME warehouses but it's not going to the market as they are going into cheaper and unregulated warehouses," a second aluminium trader said.

 

LME warehouse owners increase revenues by concentrating metal in individual locations, where consumers can face queues of up to a year and a half to get hold of it and the aluminium incurs rental charges during the wait.

 

In addition, vast amounts of metal is locked in financing deals, which involve investors borrowing money at low rates to buy physical aluminium, striking a warehouse deal to store it cheaply and taking advantage of the market's contango structure to sell it forward immediately at a profit.

 

The aluminium cash contract is trading at a $36.75 discount to three-month prices, compared with a $3.25 premium in late August, which was its highest premium since December 2012. 

 

New 'fibre-reinforced aluminum' to generate 50% energy savings: Research

 Research conducted by the Hong Kong's University of Science and Technology is reported to have developed a new aluminum material named ‘fibre-reinforced aluminum' with augmented strength features that could possibly make it a potential replacement for steel and cement in buildings. The researchers claimed that the new material was 30% stronger than aluminum and lighter and less expensive than steel.

The new product is being made by altering the structure of carbon and aluminum materials at nano-level, allowing them to bond without using glue. A layered combination of the new product with gypsum, foam and other materials is likely to lead to 50% energy savings. The new product reduces the escape of air through gaps in the buildings which in turn may lead to less energy consumption to cool or heat rooms.

The research is being headed by Professor Ben Chan Yui-bun of the Department of Civil and Environmental Engineering. According to him, though the technology is in its early phase now, the newly developed aluminum material has immense potentials to be used in the manufacture of mobile phones, laptop casings, cars and planes, in addition to being used in building construction.

The Hong Kong's University of Science and Technology carries out the research in collaboration with Moscow State University and several other Russian universities. It is being funded by the world's largest aluminum company, UC Rusal.

Aluminium on the rise, again

Metal supply seen in deficit as global economy paces up

The ultimate result of the 2008 global financial crisis was the end of the multi-year long commodity super cycle in base metals. Since then, most of the ferrous and non-ferrous metals have been largely in the bearish territory on concerns over the slow pace of economic activity that reduced the demand of metals. Aluminium has been the worst-performing non-ferrous metal, though it is one of the prerequisites of industrialisation of a country. However, the recent price actions in the commodity reflect a recovery amid reports of strong economic activity from the major consuming countries, coupled with supply uncertainties.

Price moves

During mid-2008, aluminium prices on the London Metal Exchange was around $3,375 a tonne but later they plummeted to $1,275 by March-end 2009, dropping over 65 per cent due to worries over global economic slowdown. Sentiments in the domestic bourses were also not different, but a weak currency provided some support.

Strong physical demand

Higher usage from industries such as automobile, construction, transportation, aviation and packaging sectors turned the physical market deficit. Automobile manufacturers are seen shifting to aluminium instead of steel to trim down the vehicle weight and thereby, reduce emissions in consequence of strict rules of the European Union and the US.

Low output from China and other producing nations together with a lag in getting the metal released from LME warehouses have also created tightness in physical market.

Increased surcharges and tightened LME rules for releasing materials from warehouses resulted in slowing down the delivery of the commodity. However, global demand exceeds supply with production of primary aluminium in the second quarter of 2014 pegged at 13.284 million tonnes (mt) against a demand of 13.753 mt.

Cut in production

Reportedly, China has de-commissioned several high-cost and polluting smelters with a production capacity of around two tonnes. Due to the scarcity of raw-material, Chinese imports of alumina, a material derived from bauxite to produce aluminium, increased significantly during the first half of the year. China had earlier increased its aluminium smelting capacity regardless of its mounting dependence on imported raw materials from other countries such as Indonesia and Australia. Besides China, Australia has permanently shut a 190,000-tonne smelter recently. Lower global prices and increased cost of power and labour urged many producers to reduce their production. However, supply-demand imbalances outside China alone are around one mt.

Earlier, an export ban of unprocessed mineral ores from Indonesia lifted prices. Worries over supply shortage resulted in a record high premium around $400/tonne in securing the commodity physically.

Buyers from Japan, one of the top consumers in Asia, quoted record prices for the metal as producers cut output and demand escalated. Positive global economic releases and renewed push into the infrastructure construction from China has made investors optimistic over the commodity. Smelters are refraining from adding capacity currently. Since $2,500 a tonne is required to incentivise the smelters, companies will not be in a hurry to restart the closed smelters. Also, the consensus is that the commodity will remain in deficit in the next year will lift the sentiments.

LME inventories

LME stocks have increased over the last couple of years. During mid-2008, LME warehouse stocks were around one mt but it had constantly increased testing a record 5.49 mt in early 2014. The sharp rises in inventories were due to feeble physical demand from China, world’s top consumer, and other developing nations. However, stockpiles have slumped over 15 per cent in the first half of the year to the lowest level seen since December 2011 on increased prospects of global economic recovery and concerns that the demand will outpace production.

The positive economic activity around the globe will support the commodity. Upbeat manufacturing data from the top consumer China and bullish economic activities from the US would be the trend setting factors for the commodity in the near future.

However the global benchmark, LME prices are unlikely to move past $2,500-2,600 a tonne in the immediate run due to a strong dollar whereas in the domestic market, feeble currency possibly obstructs major declines.

Japanese buyers concur to pay record prices for aluminum

The biggest aluminum importer of Asia, Japan agreed to the London Metal Exchange to pay for the metal according to the benchmark price set in the region.

According to the information provided by the sources, buyers have already struck a deal with Rio Tinto, whose proposal stated, 420 dollars per ton, which stood lower to other proposals varying from 435 dollars to 460 dollars per ton. Many others are also involved in the process of negotiation, some of them are, BHP Billiton, United Company Rusal and Alcoa Inc. other than these company’s, none others were able to struck any deals.

According to the reports, the supply of aluminum in Japan is not as tight as it is in Europe and united states and so the buyers are definitely convinced by the request for higher premiums. The price negotiations started last month will probably continue for the next few weeks

Due to the smelter shut downs and tight in supplies the aluminum producers had to increase the premiums on the base metal.

Zinc hits 4-week peak, aluminium up as funds buy

 Zinc climbed to a four-week high and aluminium neared an 18-month peak on Tuesday in markets driven by momentum-based speculators and computer-driven funds.

But analysts cautioned that both zinc and aluminium prices were moving ahead of supply/demand fundamentals as inventory levels remain high.

Aluminium prices, which have gained 13 percent over the past two months, have also been supported recently by one investor holding a large position of inventories and short-dated futures.

Three-month zinc on the London Metal Exchange closed at $2,378, up 0.9 percent, after touching a session high of $2,391.25, the strongest since Aug. 5.

"The big issue for me is that you've been seeing Chinese refined zinc production surging quite sharply since June, yet you have a relatively weak end-user sector in terms of construction activity," David Wilson, an analyst at Citi in London, said.

"Zinc has probably one of the biggest exposures to residential construction activity of any of the metals."

While investors are betting on shortages developing due to mine closures, inventories of zinc in LME-approved warehouses are giving the opposite signal, having surged by 13 percent over the last month to 739,400 tonnes.

Spot prices trading at a premium to the benchmark suggests more zinc could be delivered into LME inventories in coming weeks, broker Triland said. LME zinc cash traded at a $1.75 premium to benchmark prices, the highest in a month.

ALUMINIUM

LME benchmark aluminium closed 0.6 percent higher at $2,107 a tonne, trimming gains after touching a session high of $2,116, within shouting distance of last week's peak of $2,119.50 which was its most expensive since February 2013.

"We're surprised how far prices have risen," said analyst Ivan Szpakowski of Citi in Shanghai.

"A lot of it has been driven, we think, by CTAs (commodity trade advisers), momentum traders, and also macro trading on the more positive views of global economic growth. So, we don't think it's been as driven by fundamental factors. Our expectation is that prices bounce back lower."

Consumers have been restricted from accessing global stockpiles partly due to logjams at exchange warehouses.

Wilson said aluminium prices have been supported by one party holding up to 80 percent of LME stock warrants

"That's clearly supportive of the front end of the market, but whether it's a reflection of the real physical market, I'm not so sure," he said.

Also fuelling interest in aluminium and zinc were expectations that central banks in Europe may be forced to act to shore up their economies after weak economic data.

On Tuesday, euro zone producer prices fell the most since April, underlining dis-inflationary pressures in the single currency area ahead of the European Central Bank's monetary policy meeting on Thursday. 

"If we see more stimulus from the ECB, which is looking more and more likely, that's going to be a boost to commodity markets ... and it's helping to offset some of the more negative economic signals at the minute," said analyst James Glenn of National Australia Bank in Melbourne.

LME copper closed 0.5 percent higher at $6,973 a tonne, after losses of 0.6 percent in the previous session when it fell near support at $6,913.25 a tonne, the trough from Aug. 28, which was its weakest since Aug. 20.

Nickel ended 1 percent lower at $18,550 a tonne. brushing off threats of greater sanctions on Russia, one of the world's top producers of the metal, even though sister metal palladium has soared to a 13-1/2 year top.

Worries that sanctions could restrict supply of nickel , used in stainless steel, helped boost prices earlier this year.

Lead ended at $2,239 a tonne, up 0.3 percent and tin closed 0.5 percent lower at $21,515.