Aluminium prices dive after hitting 12-month high

Since hitting a 12-month high on May 5 at $US1886 a tonne, prices for three-month aluminium futures have slipped 4.7 per cent.

China this month removed a 15 per cent export tax on aluminium products

Aluminium is leaving the commodities party early.

Unloved through much of the commodities boom in the first decade of the 2000s, thanks mainly to high supply coming from China, aluminium had been performing strongly this year, along with other metals like copper, zinc and lead.

But since hitting a 12-month high on May 5 at $US1886 a tonne, prices for the benchmark three-month aluminium futures have slipped 4.7 per cent while other commodities have continued strengthening.

The fall in prices is rattling producers such as Russia’s UC Rusal, which this week warned of a “new turn” in the global market for the metal.

One factor troubling Rusal is the rising tide of Chinese aluminium exports. That could gather pace after China this month removed a 15 per cent export tax on aluminium products.

Rising supplies are in turn reducing the premiums producers can charge for immediate delivery of aluminium to consumers of the metal, which range from drink producers like Coca-Cola to carmakers such as Ford.

That has come just as changes to the London Metal Exchange’s rules, aimed at easing bottlenecks at warehouses that store aluminium, are starting to have an impact.

The LME had come under fire in recent years from aluminium users because of the difficulty buyers encountered obtaining aluminium. At one point, customers had to wait up to two years for deliveries.

The logjams benefited aluminium producers such as Alcoa and Rusal, because they could charge more for immediate delivery. Warehouse owners also gained from high rental charges.

But the LME is moving now to force warehouses to shift the metal quicker. The new rules came into effect on February 1.