December 18, 2019 / 3:57 AM / a month ago

METALS-Shanghai aluminium hits 3-month peak on demand optimism

SINGAPORE, Dec 18 (Reuters) - Shanghai aluminium scaled a three-month high on Wednesday, as the expected finalization of an initial U.S.-China trade deal fuelled optimism about demand for the metal used in transportation, construction and packaging.

Aluminium demand has turned “extremely good” in China, said a source with a major smelter. “Real estate is quite good and expectations are not bad either”

“Everyone has become optimistic,” after news about the interim U.S.-China trade deal, the source added.

Global investor confidence has improved since the United States and China last week said they reached a “phase one” trade pact to cool their 17-month-long trade war that has hurt global economic growth and the demand for most base metals, including aluminium.

The most traded aluminium contract on the Shanghai Futures Exchange (ShFE) climbed as much as 1% to 14,115 yuan ($2,005.28) a tonne, a level not seen since Sept. 18.

Benchmark three-month aluminium on the London Metal Exchange (LME) was 0.4% higher at $1,771 a tonne by 0315 GMT.

FUNDAMENTALS

* ALUMINA: China’s average price of alumina SMM-ALM-AVEG, the substance used to make aluminium, fell to 2,429 yuan a tonne, its lowest since May 2017, lowering production costs for aluminium smelters.

* LEAD: China’s lead production hit a record high of 572,000 tonnes in November, up 15.1% year-on-year, sparking oversupply concern and pushing ShFE lead to 14,740 yuan a tonne, its lowest since April 2018.

* BALANCE: But the global lead market recorded a deficit of 81,000 tonnes in the first 10 months of this year, compared with a shortage of 53,000 tonnes in the same period of 2018, the International Lead and Zinc Study Group (ILZSG) said.

* ZINC: The global zinc market moved to a surplus of 7,300 tonnes in October from a deficit of 21,100 tonnes in September. It recorded a global deficit of 152,000 tonnes in Jan-Oct, ILZSG said.

* OTHER PRICES: LME copper fell 0.5% to $6,168 a tonne, nickel rose 0.5% to $14,025 a tonne, while zinc advanced 0.4% to $2,290 a tonne. ShFE copper fell 0.3% to 49,110 yuan a tonne, while nickel dropped 1.2% to 110,170 yuan a tonne.

* MORGAN STANLEY: U.S. investment bank Morgan Stanley is building up its base metals trading business after abandoning it four years ago, sources told Reuters.

* For the top stories in metals and other news, click or

MARKETS NEWS

* Asian stocks camped out at 18-month peaks, having climbed for five straight sessions, while the British pound was licking fresh wounds as revived Brexit fears came back to bite it.

DATA/EVENTS (GMT)

0900 Germany Ifo Business Climate New Dec

0900 Germany Ifo Curr Conditions New Dec

0900 Germany Ifo Expectations New Dec

0930 UK CPI YY Nov

1000 EU HICP Final MM, YY Nov

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin

ARBS ($1 = 7.0389 Chinese yuan) (Reporting by Mai Nguyen in Singapore and Tom Daly in Beijing; Editing by Aditya Soni)

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