Aluminum Extends Rally to Highest Since 2013 on Supply Deficit

Aug 20, 2014 6:34 pm ET

Aug. 20 (Bloomberg) -- Aluminum climbed in London to the highest in almost 18 months after a report showed global production trailing consumption.

The output shortfall in the first six months of 2014 was 393,000 metric tons, compared with a 1.057 million-ton surplus in all of 2013, the World Bureau of Metal Statistics said in a report today. Demand for zinc topped output by 191,000 tons, after a surplus of 116,000 tons for 2013. Shortfalls were also seen in copper, lead and tin.

“People are coming to accept the fact that the market is moving into a deficit” in aluminum, Tim Hayes, a Richmond, Virginia-based principal at Lawrence Capital Management, said in a telephone interview. “Those deficits are going to look even larger come next year and even the year after that, and so we’re getting a lot more positive sentiment.”

Aluminum for delivery in three months climbed 1.8 percent to settle at $2,076 a ton at 5:50 p.m. on the London Metal Exchange after touching $2,083.75, the highest since Feb. 22, 2013.

Zinc gained 2.3 percent to $2,356 a ton. The market continues to tighten on improving Western demand and China’s record imports, Glencore Plc said in a presentation today.

Copper for delivery in three months gained 2.1 percent to $7,010 a ton ($3.18 a pound) on the LME. Lead, nickel and tin also advanced in London.

Copper cathode inventories tracked by the LME slumped 60 percent this year. Cathode, the pure form of copper commonly used in making wires, had a deficit in the first half of 2014, according to Glencore. The “critically low” stocks reflect tight market conditions, and stronger supply growth in the second half will be “tempered” by scrap shortages and risks including aging mines, the company said.

On the Comex in New York, copper futures for delivery in December climbed 2.5 percent to $3.1975 a pound.

--With assistance from Agnieszka Troszkiewicz, Maria Kolesnikova and Sharon Lindores in London.