Aluminium Price Falls as Copper Eases

Aluminium prices edged lower on Wednesday after a soggy start to the corporate earnings season, while copper ticked lower but held near recent five-month highs, supported by tight physical supply.
Alcoa reported a second consecutive quarterly loss on Tuesday, as metal prices and the auto industry slumped and global demand fell in the economic downturn.
But the world's largest aluminium producer was cautiously optimistic, saying it saw signs of bottoming or stabilising in its end markets, but it continues to project weak global demand for 2009.
"There's no doubt in my mind that we are in for a really nasty earnings season," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management.
"Alcoa's second consecutive quarterly loss is testament to that. We are in the worst phase of this recession right now." London Metal Exchange aluminium fell $10 to $1,465 and Shanghai futures dipped 1.7% to CNY12,895.
Adding to the weak sentiment was another big jump in LME inventories, which leapt 36,925t on Tuesday to a record above 3.5 million tonnes.
Benchmark third month Shanghai copper dipped CNY70 to CNY36,000 at midday, off an earlier five-month high of CNY36,470, having rallied by its 5% limit in the previous session.
Three-month copper on the London Metal Exchange fell $39 to $4,340, having touched $4,459 a tonne on Monday, its highest level since late October.
Copper prices have surged more than 50% in Shanghai and 40% in London this year, and some analysts are starting to ask whether it is time for the rally to pause. From a technical perspective at least, the Relative Strength Indicator for Shanghai copper, at 80, is well above the overbought threshold of 70 and LME copper is teetering on oversold.
"Metals were probably a little too quick off the mark. We see the economy turning in 2010 and the fact that metals have run so hard is setting us for a some profit taking," said Ben Westmore, commodities analyst at National Australia Bank.
"We expect the market to consolidate for a while to let industrial production and demand growth catch up."
Support from declining inventories is vying with lingering worries about the global economy, gains in the dollar and the prospect of another batch of dismal quarterly earnings.
So far, the stocks have had the upper hand. LME copper inventories fell 2,925t to 501,900t and the outflows are expected to continue given the 140% surge in cancelled warrants - metal earmarked for delivery - over the past three or four days to 60,850t, 12% of the total.
The cancelled warrants ratios in Asia and Europe are very similar at around 23% of the regional stockpiles, but in absolute terms Europe dominates with almost 50,000t of metal tagged to ship out. Asian cancelled warrants stand at just under 10,000t.
Firm prices in China - some CNY1,284 above LME prices after taking into account China's 17% VAT, have pulled in hundreds of thousands of tonne of metal, sending Chinese refined imports to a record 271,000t in February.
And the process is likely to continue when preliminary Chinese trade data is released next week.
"Even though the level of cancelled warrants is higher in Europe, it doesn't mean demand over there is on the rise. All that metal is going to get shipped to China," a trader in Singapore said.