Aluminium slips to 5-week low as oil prices fall

Aluminium slipped to a five-week low on Tuesday after a steep drop in oil prices weighed on the energy intensive meta.

Aluminium traded on the London Metal Exchange (LME) touched a low of $3,004.75 a tonne after oil prices dropped by over $4, before the metal recovered slightly to close at $3,035 from $3,045 on Monday.

Lower oil prices -- used as a proxy for energy in general -- tend to reduce the price of aluminium, as up to 45 percent of aluminium's production costs come from power.

However, the metal used in transport, construction and power has been boosted this year by worries about supplies from China, the world's top producer, where power disruptions have hit smelters.

A Reuters poll of 22 commodity analysts around the world released on Tuesday forecast a global surplus of 148,500 tonnes of aluminium in 2008, dropping from predictions for a 325,000 tonnes surplus in January.
 
China has forecast a power shortfall of 10 gigawatts for the summer, about 1.4 percent of installed capacity, but provinces are forecasting more than triple this.

Aluminium has risen by 27 percent since the start of the year, hitting an all-time high of $3,380 a tonne on July 10, after China's 20 largest smelters announced production cuts in a bid to conserve energy.

News that China's exports of primary aluminium fell 30 percent in June and declined 65 percent in the first half of the year would help support prices, traders said.

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