3 Min Read
* LME/ShFE arb: tmsnrt.rs/2oQ5nm2
* LME aluminium stocks down more than 30 percent since Jan
* Oil price climbs above $52 a barrel (Adds closing prices)
By Pratima Desai
LONDON, May 15 (Reuters) - Aluminium prices rose to a one-week high on Monday as the market focused on the potential for output cuts in top producer China and higher oil prices.
Benchmark aluminium on the London Metal Exchange ended 0.8 percent up at $1,905.5 a tonne, having touched $1,911.50, its highest since May 5.
"If the cuts are as draconian as some of the bulls would have you believe, then yes it can make a difference," said Societe Generale analyst Robin Bhar. "We could see a more balanced market in China and lower exports to the rest of the world."
SMOG: China has ordered aluminium producers in 28 cities to cut output during the winter and outlined plans to curb coal use in the capital in its battle against smog.
OUTPUT: China accounts for more than half of global aluminium production estimated at about 59 million tonnes last year.
OIL: Crude oil rose above $52 a barrel for the first time since April after Saudi Arabia and Russia said that OPEC-led output cuts need to be extended for a further nine months until March 2018.
COSTS: Higher energy costs raise the floor for prices of aluminium, where power can account for 25-40 percent of production costs.
INVENTORIES: Prices are also supported by tumbling stocks of aluminium in LME-approved warehouses, with inventories down more than 30 percent since mid-January at about 1.4 million tonnes. MALSTX-TOTAL
POSITION: Reinforcing nervousness about a tight LME market is a large position holding between 40 percent and 49 percent of aluminium cash contracts and warrants. MALSTX-TOTAL
SILK ROAD: Traders said that China's trillion-dollar effort to build a modern Silk Road with ports, roads and rail links had boosted sentiment in metals markets.
DOLLAR: Support for base metals also came from a weaker U.S. currency, which makes dollar-denominated metals cheaper for non-U.S. companies, potentially boosting demand.
DATA: Gains are expected to be capped by weak Chinese industrial production and investment data for April.
PREMIUM: Concern about nearby supplies on the LME market pushed the premium for tin cash over the three-month contract to a five-month high at $170 a tonne MSN0-3. Benchmark tin closed wih a 0.2 percent gain at $19,875.
STOCKS: Stocks of tin in LME warehouses, at 2,300 tonnes, are near their lowest since 1989. The tightness is reinforced by one entity holding between 50 percent and 79 percent of cash contracts and warrant holdings. MSNSTX-TOTAL
PRICES: Copper climbed 1 percent to $5,613 a tonne, zinc rose 0.7 percent to $2,571, lead was up 0.4 percent at $2,135 and nickel slipped by 1 percent to $9,230.
Editing by David Evans and David Goodman