Growing aluminium supply hurts prices

Aluminium hit its weakest in a year yesterday on rising supplies amid fears that the market is headed for the worst period in three years.

Aluminium is in oversupply with a huge stock overhang, and output has continued to rise this year, with the latest industry figures showing daily average production rising to 68,500 tonnes in April.

Norwegian producer Norsk Hydro said it would increase aluminium output by 35,000 tonnes per year.

"Although LME stocks are falling there's (still) a lot of aluminium around and (then) we see large increases in production. Aluminium needs a deficit to erode overhead stocks," Fastmarkets head of research William Adams said.

London Metal Exchange aluminium hit its lowest since March last year at $1,731 a tonne, and traded down 0.7 per cent in official midday rings at $1,739 a tonne.

Cheap coal used to fuel China's furnaces is encouraging processors to produce more aluminium and may lead to bigger exports, David Wilson, an analyst at Citigroup, was quoted as saying by Bloomberg.

Copper traded down 0.4 per cent at $6,083 a tonne, after dropping to its weakest since late April at $6,075. The red metal had been recovering from 5-1/2 year lows hit in January, although the rally has stalled in May.

Meanwhile, Chinese industrial sector profits rose in April for the first time since last September, in a sign that easing measures may be filtering into the real economy.

Overall though, copper is under pressure from the lacklustre economic outlook in top consumer China.

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