Aluminum supply limited?

August 11, 2014 07:16 AM

Aluminum rose to a two-week high in London as European equities rebounded and inventories of the metal dropped for a seventh session to the lowest since 2012, adding to signs of limited supply.

The Stoxx Europe 600 Index advanced the most since July 22 after Interfax reported that Russia’s Defense Ministry said Aug. 8 warplanes ended drills near Ukraine and Israel and militants in the Gaza Strip agreed yesterday to a truce. Stockpiles of aluminum monitored by the London Metal Exchange fell to 4.91 million tons, the lowest since Sept. 12, 2012, bourse data showed today.

“News that Russia ended military exercises on the Ukraine border has given support to European equities, which improved sentiment on base after recent liquidation,” said Mark Newson-Smith, head of metal sales at Xconnect Trading Ltd. in London.

Aluminum for delivery in three months gained 0.5% to $2,035 a metric ton by 12:49 p.m. on the LME after touching $2,042, the highest since July 25. Declining inventories helped prices, said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen.

Prices also increased after China’s consumer-price index rose 2.3% from a year earlier in July, below the government’s 3.5% target, official data showed Aug. 9. That “signaled the potential for possible policy easing,” said Newson-Smith at Xconnect.

The fee to borrow LME aluminum for one day reached 25 cents a ton today. The metal for three-month delivery settled on Aug. 8 at $4.25 a ton above aluminum for immediate delivery, the narrowest contango since December 2012, signaling supplies are becoming more limited.

Copper for delivery in three months gained 0.2% to $7,006 a ton in London. Futures for delivery in September rose 0.3% to $3.1815 a pound on the Comex in New York. Stocks tracked by the LME fell 61% this year to 141,375 tons, the lowest since July 2008.

Lead, zinc and nickel climbed on the LME. Tin retreated.

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