Shanghai aluminium hits 15-year low on demand outlook

Shanghai aluminium fell more than 2 percent to a 15-year low on Wednesday, extending the previous session's limit fall, after a Chinese consultancy said domestic demand growth for the metal would slow to 3 percent next year, or a drop of about five percentage points.

London futures also slipped after lacklustre autosales data on Tuesday compounded soft manufacturing numbers and news this week that the U.S. had been in recession for a year.

A senior analyst at Antaike, a state-owned research group, said China's consumption of primary aluminium may rise 8.5 percent this year and 3 percent next year due to the global financial crisis.

"Consumption is slowing due to the global financial crisis and weak performance of the local property market," Wang Feihong told an aluminium conference in Sanya city on Hainan island.

"The Chinese market will have a surplus and prices will fall," he added.

Primary aluminium production growth will be flat next year, having slowed to 10.6 percent this year from a one-third increase in 2007, he said.

London Metal Exchange aluminium fell $7 to $1,693, near Tuesday's 3- year low of $1,686, while Shanghai metal dropped 2.4 percent to 11,775 yuan after hitting its 4 percent downside limit in the previous session.

"Chinese consumption growth is zero, so any increase in output will be negative for prices," ANZ senior commodities analyst Mark Pervan said.

"Soft data has set the stage for a week of selling. We will probably see more supply cuts over the next few months, but a recovery in prices won't be led from the supply side. It will take improving demand to turn these markets around."

Slowing automobile sales in November, the lowest in 26 years at a seasonally adjusted annual rate of 10.2 million, have dented demand for base metals, while the $100 collapse in oil prices from July's record high to around $47 a barrel has undermined cost-driven support.

Hyundai Motor Co, South Korea's top automaker, on Wednesday joined other automakers in cutting output in most of its factories abroad due to falling sales.

Traders said Chinese aluminium futures would remain under pressure and were expected to hit a lifetime low below 11,600 yuan, the opening price for the contract when it commenced trading in late 1993.

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