Aluminium price up as China increases demand

INCREASED demand from China and significant production cuts have led to a lift in the aluminium price, but analysts warn it is too early to claim a sustained recovery.

On the London Metal Exchange, aluminium has gained about 15 per cent this month on expectations of improving demand from China, the world's largest consumer.

London-based JPMorgan metals analyst Michael Jansen said the bulls would be excited about China's imports of aluminium and copper.

"In May, aluminium imports were below the stellar level of April, but still massive at 330,000 million tonnes," he said in a report on base metals.

"And with China's appetite of aluminium now picking up again, we can expect to see July's numbers pretty strong too."

Analysts have tipped aluminium from LME warehouses could be heading for Chinese stockpiles.

China's imports of primary aluminium rose to a record 362,400 tonnes in April, about four times the volume in March, as higher local prices made imports attractive, JPMorgan said.

But Mr Jansen also noted that traders had warned there were still too many mills and stockholders in the market and not enough real demand.

National Australia Bank commodities analyst Ben Westmore said aluminium had the biggest supply overhang of all the LME-listed base metals and despite production cuts was yet to record a sustained recovery.

He said there were reports that global production had been cut by more than 20 per cent, but while China was importing more aluminium, it was also increasing its production.

"Although there has been an increase in demand for base metals in China, that strategic stockpiling will wane in the next couple of months," he said.

Mr Westmore said that while the price had seen some new life, until there was a trend in the decline in inventories, there would not be a sustained lift in the price.

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