Shanghai aluminium falls

Aluminium prices in Shanghai fell on soft physical demand and rising stockpiles, while Shanghai zinc edged up though oversupply still weighed on prices.

London Metal Exchange inventories of aluminium rose by 24,825 tonnes on Wednesday to 1.115 million tonnes, their highest since May 2004, showing supplies remain ample, despite problems with power supply in major producers, including China.

Shanghai September aluminium fell 125 yuan, or 0.7 per cent, to 19,235 yuan ($US2,822) by the midday bell, while LME three-month aluminium eased $US5 to $US3,120 a tonne, after a 2.8 per cent slump in the metal in London overnight.

Shanghai September zinc rose 170 yuan to 15,445 yuan, while LME zinc gained $US40 to $US1,835, after the metal in London fell over 2 per cent overnight due to oversupply.

Large zinc smelters in China, the world's top producer of the metal, declined on Wednesday to join output cuts proposed by smaller producers, but the smelters agreed not to start building new plants or expand projects in the second half of this year.

Analysts said the moratorium on new projects for the rest of 2008 was not enough to support domestic prices this year.

Trade sources estimated zinc stockpiles in Shanghai, eastern China's metal trading hub, could be as much as 100,000 tonnes right now, including nearly 70,000 tonnes in exchange warehouses and more than 30,000 tonnes held by merchants.

The impact of weak zinc prices, which have more than halved from their peak in late-2006, saw Burkina Faso's Perkoa zinc mine's development halted due to funding problems.

Shanghai September copper edged up 20 yuan to 62,300 yuan a tonne, while LME three-month copper rose $US20 to $US8,100.

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