Singapore - Shanghai aluminium fell more than 2% 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% 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 US 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% this year and 3% 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% this year from a one-third increase in 2007, he said.
Hyundai cuts output
London Metal Exchange aluminium fell $7 to $1 693, near Tuesday's 3½-year low of $1 686, while Shanghai metal dropped 2.4% to 11 775 yuan after hitting its 4% 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 $147 a barrel has undermined cost-driven support.
Hyundai Motor, 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.
Data deluge
The market is looking towards a spate of data starting with mortgage numbers and the ADP employment survey for November, seen down 200 000 by analysts, as well as productivity later on Wednesday.
LME copper for delivery in three months fell $50 to $3 505, and Shanghai's benchmark third-month copper contract lost 40 yuan to 27 040 yuan.
"I can't get bullish on copper. The LME looks set to break below $3 450 in the next three months, which would see prices down to $3 100," a dealer in Shanghai said.
"Shanghai futures will follow the same pattern. By February, the height of the seasonal lull in demand, we could be as low as 24 000 to 25 000 yuan, and beyond February it is also looking pretty grim."
Stocks of copper in LME warehouses are at their highest since early 2004, at above 293 025 tonnes, while stocks of aluminium, at above 1.82 million tonnes, are at the highest level since December 1994.
News that China's minerals-rich border region of Guangxi is considering purchasing metals a day after Yunnan province said it would buy up to 1 million tonnes of base metals and minerals had little immediate impact.
"On the surface the stockpile plans look supportive, but I doubt they will seep through into prices for at least three to six months," the Shanghai trader said.
- Reuters