(Bloomberg) – Aluminum slipped after hitting its highest level since 2011 on Tuesday as a Chinese industry group warned the metal’s dramatic rally was not supported by market fundamentals and could deter buyers .
Supply is not in a noticeable shortfall and consumption is not strong enough to justify such high prices, the China Non-Ferrous Metals Association said in its newsletter. Aluminum could retreat quickly once high prices impact demand and substitutions emerge, he said.
Aluminum has jumped nearly 50% in the past year, as an increase in consumption due to the global economic recovery has coincided with production restrictions in China, the world’s largest producer. The energy-intensive industry has been targeted by Beijing as it seeks to save electricity and cut emissions, while a seasonal electricity crisis has rocked production.
Aluminum fell 1.3% to $ 2,684 a tonne on the London Metal Exchange at 3:53 pm local time. Prices fell 1.5% on the Shanghai Futures Exchange. Other base metals were also down, with copper falling 1.9% in London, after a gauge from Caixin showed a contraction in factory activity in China last month.
“Base metal prices continue to contradict weaker survey data in China,” Capital Economics commodity economist Kieran Clancy said in an emailed note.
Speculators should not underestimate the determination of Chinese authorities to curb commodity prices, the non-ferrous metals association said. Commodity prices are likely to come under pressure as monetary policy is tightened around the world, he said. Beijing on Wednesday offered a third batch of metals, including aluminum, zinc and copper, from its state reserves on Wednesday. Sales have so far not had much of an impact on prices or inflation, with many analysts predicting metals markets to remain tight over the next few months.
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